MARKET GAUGE: Confirmed Uptrend
*Weekly Sector Watch highlights several industry groups that have experienced a measurable change in strength or weakness relative to other groups over the last 3-6 week period.
SECTORS EXHIBITING RECENT STRENGTH: Software (Medical), Software (Gaming), Software (Design), Electronic (Semiconductor Manufacturing), Electronic (Semiconductor Fabless), Internet (Content), Wholesale (Electronics), Electronics (Misc. Products) Electronics (Wholesale), Electronics (Parts), Medical (Research/Equipment), Medical (Long Term Care), Transportation (Truck).
SECTORS EXHIBITING RECENT WEAKNESS: Energy (Solar), Retail (Major Discount), Transportation (Airlines), Oil/Gas (Refining/Marketing), Oil/Gas (Field Services), Oil/Gas (Drilling), Mining (Metals/Ores), Banks (Foreign), Banks (Super Regional).
OVERVIEW: This week saw tech stocks and small caps continue their recent run to new highs, but the Dow which last week looked like it was ready to join the party turned tail as it posted four consecutive losing sessions to end the week. Although we do not focus on the DJIA here, it is noteworthy in showing the split that has developed during this confirmed uptrend in the market. While news of trade wars and a lack of participation from financials has plagued the index, there has been plenty of strength in various sectors for traders to focus on. In last weeks write up, we warned traders to stay on their toes for the possibility of increased volatility with continued geo-political concerns and the looming options expiration. While we did get some of this in Fridays session, the indices handled it well by closing off their lowest levels of the day. The distribution picture has brightened in the Nasdaq Composite and Nasdaq 100 this week due to their recent advances, while the S&P 500 continue to do battle with a key resistance level. Let’s go to the charts for a closer look.
SPY- After breaking out of a key congestion zone to start the month of June, the ETF quickly ran into its next big technical challenge near the $280 level. After testing the waters for four consecutive sessions to start the week, the EFT backed off on Friday. Fridays session saw the SPY dividend payout adjustment, so the gap down in the chart should be taken in context. Additionally, despite the spike in volume, the SPY will avoid a distribution day due to options expiration inflating the numbers. In fact, the S&P 500 index itself lost only 0.10% for the session which is shy of a qualifying distribution day. Next weeks post options expiration action may tell us more about where the index is headed, but in the meantime continue to focus on the individual names in your portfolio as well as the current market leaders, as these should be the ultimate barometer for your trading action. The ETF sits with five distribution days on the books, but will lose one of the count next week after Tuesdays close due to time.
NASDAQ- The Nasdaq Composite continued its June breakout by adding 1.32% this week as index components continue to be immune to trade worries at this point. The index has been trending steadily higher since early May and is now up over 10% from the low it posted on 5/3. The distribution picture brightened here as well recently as the 5/18 and 5/29 sessions (marked below in pink) were wiped clean due to the nearly 6% advance the index has registered from the lows set on those days. Volume spiked due to options expiration on Friday but the index lost less than the 0.20% needed to qualify for a technical distribution day. Additionally, in yet another bullish sign, the index finished in the top third of its range on Friday.
QQQ- The Nasdaq 100 also posted another strong week by adding 1.46% marking a new all-time closing high, and this marks the fourth consecutive week of gains for the index. Due to advance, we have wiped out three previous distribution days the index registered in May, and while we did decided to slap the Q’s with a distribution day on Friday, it is marked in blue and will be taken in context due to inflated option expiration numbers. The index now sits with only two distribution days on the books over the last 25 sessions and we will looking for support near the $175 level on any pullback.
IWM- The small caps were the most well behaved index on Friday and this should come as no surprise. Th index is now up over 14% since its April low and continues to act well. The index posted a gain of 1.29% for the week and has now registered an advance in six of the past seven weeks. The index sits with three distribution days in the current count, but the selling in two of those three sessions was fairly tame. Traders should continue to be diligent in looking for trading set ups within this group.
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