The SP is making good on improving technicals. On light volume, more on that later, the futures gained 18 on the day marking the best close in weeks. Many of the financial commentators will dismiss today’s rally as unimpressive because of the low volume but be prepared for more of the same. There is an unusually large amount of institutional cash on the sideline. This is the perfect environment for a low volume summer walk up of stock prices. As long as the technicals remain positive and the trend bias is up, look to trade the long side of the market regardless of the volume. We’ll all have a chuckle in August if the “feeble, lackluster and uninspiring” volume carries price back to 1350 and we’ve been long the whole way even as the financial commentators continue to dismiss the move as “unsustainable”.
Naz added 35 on the day which was a slight underperformance to what is should have done. This is really the only technical compromise from the markets today. The static trend line and 50dma are the trade-to-target.
Multi sector daily chart:
The OSX was top gun on the day, outperforming all other major sectors. If the market gets in gear for a summer rally, this sector should break the DTL. Set an alarm.
The XAU was stronger than the broad market with an implied first bounce target of 200.
Be sure to overweight the Transports for the next few weeks. They are typically the best late cycle performer. Truckers, airlines and shippers should all be evaluated for long trades. Note that the TRAN is already back above the 50dma
The SOX is still a problem. They are still well below the midpoint of trade for the month and underperformed both the broad market and Naz today. There will be a big pop soon but follow through will be bumpy and uneven. The pigs will get their lipstick but continue to underweight.
The XAL underperformed on the day and is now 9 days up. When this DTL gets taken out they should begin to fly.
The BKX was last laggard on the day but should soon pivot and make good on the 13 exhaustion signal. 200dma by Labor Day? The BKX is the big early cycle sector which means that they are typically not top performers late in the cycle where we currently reside. This means that if the banks can turn positive it is a confirmation signal that the market has made a real turn and that even the less desirable sectors are attracting money. These confirming signals define the “rising tide” of true bias.
Oil bounced back to the 200dma.
Gold has broken trend and is a source of funds.