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XLI

Trend bullish, but SPX faces resistance entering June

May 31, 2016

S&P JUNE FUTURES (SPM6)
Contact: info@newtonadvisor.com

2039-40, 2029-30, 2022-4, 2007-9        Support
2105-6, 2112-4, 2025-6                             Resistance

 

Key Takeaways:

1) S&P trend changed to bullish on last week's move above trendline resistance at 2065 which carried prices quickly up to test mid-April highs. However, upside now looks limited given overbought conditions combined with short-term cycles and former highs being technically important.

2) US Dollar index poised for its biggest monthly rise since September 2014 with returns through 5/30/16 of 3.6%.  Precious metals have been hard hit in the last two weeks given this rally.

3) Emerging markets, conversely, have been hard hit in May, with MSCI Emerging mkts index falling nearly 4%, the most since January, while Brazil's Bovespa dropped nearly 9% on the month. 

4) Treasury yields seem to be readying for an upside breakout, which could allow the long end to join the recent gains in 2 year yields.  Given the Fed's determination at readying the market for a rate increase, the bond market seems to be paying attention on the front end, while 10 and 30-year yields, similar to stocks are up near key short-term resistance.

5)  Technology, Financials and Healthcare dominated performance for May, with the SPX's 1.4% gains for the month with one day remaining being led by the three sectors that account for 50% of capitalization

6) Sentiment has begun to show some evidence of following the most recent rally, as Equity put/call data dove from readings shown earlier in the week.  By end of week, the Equity Put/call had fallen to levels not seen since last August.

7) Breadth continues to be supportive of a move back to new high territory, while climbing back to April highs might allowfor a bit of resistance to take hold as the indices enter June.  However, the beginning of the month tends to be far better seasonally speaking than back end-end of quarter, which often shows end-of-quarter positioning.


S&P 500

Short-term Thoughts (3-5 days) : Trend bullish but has reached former April highs which looks to be a logical place to pick a spot to fight this trend, for those who intend to do so.   A stalling out is possible between 6/1-6/4 based on the combination of short-term cycles, former highs acting as resistance, along with overbought conditions in the near-term.   However, this rally looks to move back to new high territory in the weeks ahead, so its smart not to get too aggressive in hedging, or trying to short into this move, as the pullback could prove minor before moving back to new high territory. 


Intermediate-term Thoughts (2-3 months): Bullish-    A move back to new high territory is expected before indices turn down to begin any larger correction.  The uptick in bearish sentiment given that indices are within 3.7% of all-time highs looks to be an important factor arguing that further selloffs could prove muted for the time being.  From a fundamental and macro standpoint, factors like ongoing revenue concerns, FOMC uncertainty, China & Emerging market growth, along with Election year angst have all served to fuel bearish sentiment steadily.  Meanwhile technically, despite the short term churning, there remains precious little to be all that concerned about given the medium-term picture.  The A/D-Advance/Decline for the NYSEhas recently moved back to new all-time high territory while weekly momentum remains bullish.   The 5-day Put/call ratio meanwhile has hit the highest levels since mid-February while AAII polls show a greater number of Bears than Bulls for the second straight week.  In addition, the total Put/call ratio has hit the highest level in over three months.  Sector-wise, the start of Technology outperformance in the last week could be telling, as the NASDAQ has begun to act a bit better after a lackluster few months.  While this six-month period remains seasonally weak and daily and monthly MACD are negative, gains should be able to hold indices up into late August before any pullback into the end of Q3. 


Technical review and What to expect

The last week brought forth some fairly significant technical developments, as the S&P managed to breakout of the minor downtrend from mid-April and accelerate all the way up to test these levels by end of week.  As of 5/30, the electronic session in Monday's holiday session saw S&P futures close within a point of all-time high territory, 2101 vs last May 21-2103, while still under the intra-day 2105 which was recorded both last May and this past April.(and still 1.4% below SPX cash peak closing prices just above 2130) While near-term momentum has gotten stretched on this recent 3% spike in prices in the last 10 days, the weekly structure suggests this was quite the bullish move, not only canceling out the thoughts of a possible Head and Shoulders pattern at play, but also improvingthe technical structure on an immediate move back up to levels that were hit around the middle part of April.  The trend is bullish short-term, and closing in quickly on key overhead levels, which should be a source of resistance entering the month of June.  However, if all-time highs are exceeded in the SPX, NASDAQ and DJIA, this should provide the impetus for a quick move to SPX 2250 into the summer, allowing price to join the recent breadth improvement and move back to all-time highs seen by the Advance/Decline for all securities.

For now, bonds haven't really shown signs of selling off too substantially on the long end just yet, which would be thought to be the case if the FOMC suspects the US economy is strong enough to hike in June or July.  2 Year yield attempted to breakout, while 10 and 30 remain more subdued, but do lie near key areas where breakouts might happen in the next couple weeks and have to be watched carefully here in this regard.  Meanwhile the US Dollar index should be closing in on its first major area of resistance near 96, which might cause a temporary stalling out in the US Dollar and allow for short-term bounces in both the Euro and Gold.  

Overall I suspect this week could provide a short-term stalling out in stocks, but am skeptical that equities show any sort of meaningful selloff other than a 2-3% drawdown at a maximum before moving back to new high territory.  And despite any near-term slowdown, it remains right to be long in selective stocks within Technology, Financials and Healthcare, as these sectors provide about 50% of the total SPX composition and should outperform in the next couple months.

This week's Weekly Technical Perspective covers 10 stocks within the major 10 sectors that are all poised for potential further gains in the weeks ahead.  Each of these has bullish technical structure and has recently moved to new 52-week highs, or is on the verge. Charts and comments below.

 


Charts & Writeups- 10 Bullish stocks to consider technically among 10 different S&P Sectors
 

Technology-  Intuit (INTU-$107.89)-   INTU looks technically attractive, and its ability to have rebounded back to test the highs of its ascending triangle formation from last May should result in an upcoming breakout to new high territory.   Given the stock has moved in a linear uptrend since the latter part of 2008, this triangle formation since 2015 represents a change in structure.  However, ascending triangle patterns of this sort tend to be bullish continuation patterns, and should lead to an upcoming breakout given historical precedent in how these patterns are typically resolved.  Movement back up above $109 should lead straight to $120 and any pullback in the days and weeks ahead to near $105-$106.50 should constitute a technical buying opportunity.


 

Financials- PrivateBancorp (PVTB- $44.54) PVTB's strength in climbing back above $44 puts this stock in a strong technical position as it's setting up for an upcoming test of last year's highs near $45.79, made in November.  However, the larger pattern remains quite constructive, and little resistance lies between current levels and the area near $50 which has hit initially back in 2008.

 

Energy - Concho Resources inc (CXO- $122.19) CXO's rally back above $110 serves as a breakout of the two-year downtrend in place for this stock, and allowed for acceleration up to over $120 in a short period of time.  Given that Crude's rally is ongoing and to this point has shown little signs of peaking out, the Energy sector remains one to favor technically.  CXO's outperformance this year speaks for itself after having risen 31+% this year through 5/27/16, but given this move back over the descending trendline, it looks to have further to go, technically speaking.  Initial targets lie near last May's highs at $134, with movement over allowing for a move back up over $140.

 

Industrials -  Acuity Brands (AYI- $256.21)  AYI is bullish technically and the breakout into mid-April looks to have consolidated sufficiently and now could give way to a move back to new high territory in the weeks ahead. While the selloff into February of this year caused some minor trend damage, this was recuperated nearly right away and the larger trend for AYI remains in parabolic mode since early 2009 with an accelerating trend of higher highs and higher lows at an increasing rate.  Key for short-term traders will be a move back over $259 which should drive this up to $280 which is an attractive area to sell for trading purposes.  For intermediate-term investors, a move back down under $239 is necessary to think this rally might be postponed.

 

Healthcare -  WebMD Health (WBMD- $65.32)  The recent breakout of the enormous nine-year double bottom pattern has meaningful bullish intermediate-term implications for WBMD and should help the pattern continue to stretch higher, despite a near 75% gain in prices just since last September alone.  Monthly RSI has hit 75, which might seem troublesome for the months ahead, but the move over two prior highs from 2011 and 2007 should help WBMD hit $70 before any stalling with a good likelihood of $80 potentially being reached as an intermediate-term technical target.  In the short run, any pullback to the low $60s all the way down to $58 would be an excellent area to consider buying dips.  But the intermediate-term progress in exceeding two prior highs made more than five years ago is considered a reason for optimism overall with WBMD.

 

Materials- Vulcan Materials (VMC-$118.12)-  VMC remains in acceleration mode as it completes the right side of its giant "Rounding Bottom" pattern with upside targets at $128, or nearly 8% above.  Given that this level held the initial time back in 2007, it should serve as a magnet for prices but also likely cause a real stalling out in the shares on the first retest.  Overall, pullbacks to $110-$115 would likely constitute an attractive opportunity to buy dips with upside targets near these former highs in 2007.  For now, VMC remains one of the more attractive within the space, and has shown very little signs of any weakness, with even its February 2016 pullback proving minimal and leading to move back to monthly highs within the next few weeks.

 

Telecom -  Verizon (VZ- $50.62)  VZ's pattern improved substantially given the rally back to test 2013 highs early this year.  The subsequent pullback failed to do much technical damage and has now provided an opportunity to buy dips with key upside resistance near $55.  Overall, this pattern in VZ between 1999 and 2013 resembles a giant base for this stock with subsequent three years representing a higher base which should give way to an eventual rally back to test 1999 highs.   Verizon also has taken some positive steps of late relative to AT&T, and could be in the process of bottoming out in relative terms and starting to relatively outperform.  Overall, given the amount of strength early this year followed by the recent consolidation, VZ remains attractive to own, with movement back over $55 leading to the real acceleration that will allow this to eventually retest $63.

 

Consumer Staples - Molson Coors Brewing (TAP-$100.20)  TAP's move back to new monthly highs in exceeding former levels set back last November/December when equities peaked last year should set the stage for additional strength up to near $110 before any meaningful peak.   The initial advance late last year managed to exceed nearly six months of sideways consolidation and TAP has continued to show very good signs of technical structure, with an ongoing pattern of higher highs and higher lows which makes this stock one of the better within its peer group to own. 

 

Consumer Discretionary - Hasbro (HAS-$87.28)  HAS looks attractive technically given the stock's ability to rise back over highs set this past Fall and now the recent stalling out is showing signs of being resolved by movement back to highs given last Friday's advance.   Upside targets lie near $90 and then $100, which should be meaningful to HAS given its prior rise.  Momentum-wise, the stock's pullback last Fall helped to alleviate some overbought conditions, and its recent move back to new highs looks to have been consolidated in good fashion which should allow for rallies back above $90.  Overall, HAS is attractive, and long positions are warranted at current levels, looking to buy dips.

 

Utilities -  P G $ E (PCG- $59.12) PCG is attractive within the Utilities space given that the stock has not yet moved back to new highs, and rests near former highs from last Spring, which provided resistance on the initial test earller this year.  Getting back above $60 looks likely in the weeks ahead and should provide a springboard for PCG to rise to at least $70 on an intermediate-term basis.  Giventhat stock completely retraced the weakness into last Fall, a move back up above $60 on a weekly basis should result in real upside acceleration.

 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Aerospace/Defense breaking out among Industrials

May 9, 2016

S&P JUNE FUTURES (SPM6)
Contact: info@newtonadvisor.com

2037-8, 2026-28, 2007-9              Support
2068-70, 2089-90, 2105-6            Resistance

 

In This Issue

S&P gains last Friday still haven't done enough to think immediate gains happen

Industrials under review, and specifically, Aerospace & Defense

 

Summary: Short-term weakness still looks to be at hand, despite last Friday's bounce attempt, as downtrends from mid-April remain intact and insufficient strength has been seen to call a bottom of any sort. 

Europe did successfully attempt to stabilize late last week, but the price action in both the SPX along with the World index is certainly inconclusive of any low.  In the bigger picture, there is a good likelihood that weakness proves minimal in the weeks ahead, however, given that pullbacks have taken prices right above several different kinds of technical support while bearish sentiment is on the rise.  For now, selectivity remains key in stocks and important areas to look for support lie near 2026-8 initially in S&P futures followed by 2007-8 which looks to be much stronger.  Overall, with technical support less than 1% away, one should take a look at using any pullback to cover shorts, while considering the Metals stocks, technology, buying into Consumer Discretionary and Healthcare after recent weakness.  The Aerospace & Defense sector has some allure within the Industrials space (which will be showcased below) as its move back to new highs makes this one of the stronger areas within Industrials.

In the short run, the near-term technical picture remains pointed lower, with bearish daily momentum pointing down,with breadth averages not having rebounded sufficiently to have conviction.  For those that utilize counter-trend indicators for buying into downtrends, those also remain inconclusive at this time and not complete, which eyeing NASDAQ, SPX, or Treasury yields (which have trended very closely to stocks in recent months.   However, with Ichimoku cloud support directly below, and positive intermediate-term momentum, the bigger picture still looks fine for Equities.  As reiterated above, Minor drawdowns should be used to buy in the next 1-2 weeks with S&P futures likely finding support near 2026-30 as maximum area of downside before a move back to test and exceed November 2015 highs on the way to new high territory.

Overall this part of the year typically isn't for the faint of heart now that stocks have entered May.  We've entered that part of the year where indices have traditionally been seasonally weak, particularly in Election years.  According to Stock traders Almanac, Presidential election year Mays rank poorly #11 of 12 for the DJIA and S&P and #9 for the NASDAQ.   The "worst six-month period" has indeed begun, and as history has shown, a $10,000 investment held only from May-October would have lost money since 1950, VERSUS the six "BEST" months of the year- November - April having grown to $838,486 in the period from 1950-2014.  Astounding indeed.  Given that technical indicators such as MACD turned down on daily charts, this period is upon us yet again.  Sector-wise, Banking Materials stocks and Gold and Silver traditionally decline during May.  The Financials certainly have followed suit there but Materials stocks have largely shrugged off this seasonally weak period thus far as Gold and Silver's rise have shown little signs of reversing course. 

Industrials has interest at this stage of the rally given that it's had some impressive outperformance in recent months, but yet has stalled out recently given signs of XLI nearing former peaks along with many stock in this sector. While Capital goods and Aerospace and Defense remain on solid ground, other sectors like Machinery have largely rallied on Dollar weakness but could be prone to give up that outperformance if the Dollar turns back higher, which looks likely.  The Aerospace & Defense part of the group still has a lot of allure within the space, with many stocks having recently broken out to new 52-week high territory.




Top 7 Ways to Play Industrials, Techically speaking
1) BUY XLI, which still looks to make headway vs SPX after recent weakness
2) Buy Aerospace & Defense- Breaking out to new high territory- Favor RTN, GD, LLL, & LMT.
3) Buy XLI vs Europe's SXOP 600, the Construction and Materials index
4) Buy Rail stocks vs the Airlines
5) Sell(Short) Machinery stocks
6) Sell (Short ) Transport stocks more than 2-3 months in duration
7) Buy XLI vs China-  Favor XLI over FXI

 


Charts & Writeups-  Industrials Sector, Absolute, relative, XLI v SXOP, Rail vs Air, XLI vs FXI, Aerospace & Defense, others
 

SPX index- Weekly- Following a sharp nearly 200 point rally in S&P from mid-February into mid-March, SPX has traded largely range-bound over the last seven weeks, at an area right near former highs from November.  Sentiment has turned bearish in the last couple weeks given the stallout, as seasonality concerns combined with lackluster earnings and ongoing concern of China and/or the course for US Fed policy have kept people largely on the sidelines in the last couple months.  As of last Friday, the AAII sentiment showed 30% Bears vs 22% Bulls, with SPX just 3.3% off all-time high territory from this time last year.  So we've experienced nearly a full year of dramatic selloff and recovery with prices nearly at prior levels from last May.  Overall, the near-term pattern remains negative over the last couple weeks, but selloffs should prove minimal before rising prices carry SPX back to new highs into June/July based on the current structure.  In this scenario, SPX has no business being under 2000 and any additional pullback this week should be used to buy down at 2030 area down to 2010 for upcoming gains back to new highs.
 

Industrials- XLI shows the sharp outperformance in February in relative terms (See graph below price of XLI vs market) followed by a period of Catchup for the other sectors, as Industrials slowed.  The act of getting back above former highs from last November/December is definitely a positive technically, yet the area at former Spring highs remains a strong area of resistance.  Technically speaking the recent pullback into the 50-day moving average could provide good support for the group, given that it also lines up with former highs from November 2015 along with having provided good support and resistance for XLI going back since mid-2015.

 

Industrials in relative terms to SPX when looking on an Equal-weight basis (to strip out the effects of GE) stalled out in recent weeks right near highs made back in 2014.  Recent churning hasn't done much to suggest much of a top at work, but just a slowing in performance given the presence of former highs.  Arrows shown point to counter-trend sells and buys in relative terms right near highs and lows respectively.  For now, additional churning can happen, but movement up to new highs looks to be in the cards which will allow for a bit more outperformance out of this sector into the summer months before any real top.

 

Industrials in equal-weighted terms, broke down relative to the market much earlier than most indices did in January of this year, having made its decline in late 2015.   While the sector peaked out right when Small-caps did in mid-2014, it was the breakdown below prior lows from 2015 that caused the real downside acceleration.  At present, Industrials seems to still be in the midst of a bounce from oversold levels, but its equal-weight chart is far more negative than what might be seen from looking at XLI charts with price within a whisker of all-time highs. The equal-weight picture has seen far more deterioration..

 

US Industrials vs STOXX 600 Construction & Materials index-   XLI is bullish vs European construction and materials stocks, as prices have just risen to the highest levels since early last year.  This technical rise back above March-April highs suggests further upward acceleration, and should continue to favor US Industrials vs European stocks of similar nature.

 

RAIL vs AIR- While the intermediate-term trend remains negative, this chart of Rail stocks vs the Airlines has shown real progress in recent weeks that makes additional gains likely in relative terms, favoring the Rail sector-  XAL has dropped down from highs near $97 to under $86 in the span of just a couple weeks which has helped this relative chart break out of a mild downtrend created from early 2015.  In the weeks ahead, additional strength still looks likely in the Rails, and if getting above the longer-term trend from 2012, this would offer a larger move for the group, suggesting overweights in Rails vs shorting/underweights in the Airlines.

 

Machinery vs Industrials-  Machinery stocks look to be at key resistance from longer-term trends from 2014, and recent stalling out suggests a possible move back down to lows.  The group has experienced strength right at a time of the falling US Dollar, which plays into the theme of multi-nationals like Caterpillar (CAT) bouncing.  Now that the Dollar has been widely shorted and shown some evidence of turning back higher, (which might take a few more weeks), the Machinery stocks could very well begin to underperform again, as seen by this ongoing downtrend remaining very much in place.

 

S&P Aerospace and Defense index has just moved back to new high territory after exceeding highs which were important in late 2015 along with winter 2015 highs.  This breakout which happened initially in late April and was consolidated, looks positive for continued outperformance in Aerospace and Defense in the short run.

 

Aerospace & Defense vs SPX has just made new relative highs in the last week, besting prior levels seen back in early 2015 along with 2014.  This should allow for a period of outperformance that's likely worth chasing technically with those with timeframes of 3-5 weeks or longer given that relative charts have just advanced to new all-time highs.  While stretched on monthly charts, it's worth still favoring this sector for outperformance until some evidence of trend deterioration occurs.

 

Transports vs XLI-  New relative lows look possible for the Transports vs the Industrials sector give this group undercutting April lows which puts it within striking distance of levels seen back early this year.  Overall, Transports showed evidence of peaking back in 2014, back when Small-caps topped out, yet most broader indices continued higher.  This retest of former lows is due to trigger counter-trend buy signals in the next few weeks, but for now, additional move back to new lows should occur.

 

Ratios of XLI to FXI suggest Industrials should outperform China in the short run, as seen by XLI moving back to new highs vs the Ishares China Large-Cap ETF.   Overall, a very steep advance since mid-2015 and one which looks likely to continue given this move back to new high territory.


 

Disclaimer:

This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein, and may be subject to change without notice.   Newton Advisors, LLC has no duty or obligation to update the information contained herein.   Further, Newton Advisors, LLC makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.  The information provided in this report is based on technical analysis. Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows in an attempt to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer. The investments discussed or recommended in this report may not be suitable for all investors.  This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction.  Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources.  

Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.  Newton Advisors, LLC believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.  From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report:  This report, including the information contained herein, has been prepared exclusively for the use of Newton Advisors clients, and may not be copied, reproduced, redistributed, republished, or posted in whole or in part, in any form without the prior written consent of Newton Advisors, LLC.

Major Sector Review- 04/19/16

April 19, 2016

S&P JUNE FUTURES (SPM6)
Contact: info@newtonadvisor.com

2058-60, 2026-7, 2000-1, 1982-3       Support
2083-4, 2100-2105, 2130-3   Resistance

In This Issue

Sector view: Healthcare, Materials breaking out, following recent Financials move

Shift out of Defensive sectors adds credibility to the rally

SPX resilient at a time when most expected to fall

Technical Sector Summary: 4-6 Week timeframe is basis for grouping-  Calls are made based on thoughts of the groups going forward between now and the end of 2Q, vs how much the sectors have trended up in the past.

Bullish

Healthcare- Short-term bullish- Intermediate-term bullish- Healthcare is just starting to emerge again after breaking out 4/18 from its downtrend from last summer (XLV) and showing evidence that its relative chart has also broken out vs the broader market and now turning back to the upside- XLV should rally up to challenge 72.90 from its current 70.67-  Most attractive Trend Following: UNH, JNJ, BCR, BDX, SYK, WAT.  Most attractive risk/rewards: MDT, BSX, GILD, CELG, ALXN, REGN, XRAY--Consider XLV, VHT, IYH, IHI, IHF, XBI, DRG

Financials- Short-term bullish, Intermediate-term Neutral- The recent breakout in XLF vs SPX has helped this sector to rebound at the right time and provide the market with some much needed participation, with above-average gains in banks, broker dealer stocks, insurance and the REITS.  Short-term momentum has turned positive on XLF, while relative charts of XLF vs SPX have broken out above former lows and mild downtrends that make this sector one to overweight for the weeks ahead.  Unfortunately, given the long-term Neutral pattern present in this group, only near-term strength can be recommended at this time.  If and when this sector begins to show signs of a larger breakout, this would add to the bullishness of this group on a long-term timeframe.  Most attractive trend following names:  Most attractive Technical risk/rewards : GS, SLM, BLK, V, MA, JPM, ETFC, AMTD, NDAQ, ICE

Materials- Short-term bullish Interestingly enough, one of this year's best performing sectors Year to Date is also one of the laggards on a six-month basis which incorporates the last two months of 2015.  This sector has been steadily improving given the weakness in the US Dollar which has helped the Mining sector along with Chemicals.  XLB has just broken out above highs seen back in March, along with last November/December, which puts this at the highest levels since last July.  Given the ongoing pullback in USD, further strength looks likely for Materials in Q2.  Most attractive risk/reward names: WM, FAST, DOW, AA, NEM, IFF, IP, VMC.

Energy- Short-term bullish, Intermediate-term bearish, and additional progress is necessary before thinking this sector can simply continue higher without facing real challenges.  For now, a bullish call is based on the period between now and late May, where Energy still looks to outperform.  However, technically, gains into the next month would call for profit-taking in most stocks and extreme selectivity given the run that this sector has enjoyed over the last couple months.- Gains likely up to challenge last year's 70.78 highs from its current 64.59.  Given that Crude has survived the Doha scare with no real technical damage given complete inaction on the part of OPEC but thoughts turning to June, this sector could show real outperformance inn the next couple months before any peakout, seasonally speaking.  XLE has just exceeded trendline resistance from last year, and has just surpassed its 200-day moving average for the first time in the last three attempts since last Spring.  Momentum indicatorslike MACD are positively sloped and trending higher-  Most attractive Trend following:  HES, APA, NFX, XOM, CVX

TechnologyShort-term, intermediate-term Bullish-  Minor slowing of late near former highs should present good opportunity to buy for 1-2 months of outperformance before any Summer slowdown begins.  XLK has been consolidating right near former highs but slightly above, while relative charts vs SPX haven't declined substantially enough to expect a meaningful slowdown.  This minor relative weakness in the last few weeks appears to be down near key trendlines which should result in this sector beginning to lift back higher.  Most attractive risk/reward names: ADBE, AVGO, TXN, SGMS, NXPI, NVDA, GOOGL, MSFT, A, TXN


Neutral

Consumer DiscretionaryShort-term bullish on absolute basis, while relative charts vs SPX are more neutral.  Given Monday's breakout above late March highs, XLY likely finds strong resistance near 81.23, former highs, which lie just above current levels, while relative charts have been flat and range-bound for the last few months.   While it's tough to argue the strength in this sector since mid-February, the risk/reward doesn't look as appealing in the short run, particularly given the relative churning in the relative line given that price lies $1 from former highs while momentum has waned a bit in the last month.  Most attractive risk/reward names : NKE, SBUX, ORLY, UA, DG, MCD, HD

Industrials- Upside might prove limited near-term given price being right under former highs- Similar to Discretionary, noone can argue the near-term strength or outperformance, but XLI lies right near former highs within .75c and relative charts have flattened a bit given the churning in the last month.  The ability to breakout back to new all-time highs would encourage following this sector and overweighting yet again, but given the move its had, it's important to be a bit more selective given that prices remain within striking distance of highs from early last year.  Most attractive risk/reward names: RTN, COL, ROK, MMM,  TEX, BLL, LMT, MMM, DOV, MLM, FISV, ADP, TDG


Bearish

Utilities-  Stretched and additional mean reversion, pullbacks likely for Utilities after move to new alltime highsOutsized outperformance this year now starting to wane as indices near highs and Yields beginning to stabilize- Expect underperformance between now and June as indices breakout to new high territory and yields move North.  Most attractive for a risk/reward basis: NI, WEC, PPL, PNM

Consumer Staples- Near-term underperformance likely-  This sector has gotten stretched, while the relative strength has slowly begun to turn down over the last month as evidence of Sector rotation took hold and flows out of Defensive sectors started to occur.  Most attractive for a risk/reward basis include: CPB, RAI, CAG, CLX, KO, PM, WMT, DG, and TAP.

 



Sector Thoughts- Charts and additional analysis of the major SPDR Sector ETFs

 

Healthcare- (XLV)- Healthcare is just starting to emerge again after breaking out 4/18 from its downtrend from last summer (XLV) and showing evidence that its relative chart has also broken out vs the broader market and now turning back to the upside- XLV should rally up to challenge 72.90 from its current 70.67.  Overall, this sector appears to be just turning back higher after a lengthy six month period of consolidation, and appears like a much better risk/reward than most stocks within Industrials, Cons. Discretionary, or the Financial sector, mostly based on its short-term correction within the larger bullish base.

 

Energy-(XLE)-Energy looks to be just starting to make more meaningful progress that could allow for additional gains ahead of the next big meeting in Doha in June.  For now, a bullish call is short-term in nature only, where gains into the next month would call for profit-taking in most stocks and extreme selectivity given the run that this sector has enjoyed over the last couple months.- Gains likely up to challenge last year's 70.78 highs from its current 64.59.  Given that Crude has survived the Doha scare with no real technical damage given complete inaction on the part of OPEC but thoughts turning to June, this sector could show real outperformance inn the next couple months before any peakout, seasonally speaking.  XLE has just exceeded trendline resistance from last year, and has just surpassed its 200-day moving average for the first time in the last three attempts since last Spring.  Momentum indicatorslike MACD are positively sloped and trending higher Yet the larger pattern continues to suggest caution on an intermediate-term timeframe, so for now, near-term strength is likely and we'll see the extent of the outperformance and be on the lookout for signs of stalling out in May/June.
 

Financials -(XLF)- The recent breakout in XLF vs SPX has helped this sector to rebound at the right time and provide the market with some much needed participation, with above-average gains in banks, broker dealer stocks, insurance and the REITS.  Short-term momentum has turned positive on XLF, while relative charts of XLF vs SPX have broken out above former lows and mild downtrends that make this sector one to overweight for the weeks ahead.  Unfortunately, given the long-term Neutral pattern present in this group, only near-term strength can be recommended at this time.  If and when this sector begins to show signs of a larger breakout, this would add to the bullishness of this group on a long-term timeframe
 

Materials- (XLB)- Interestingly enough, one of this year's best performing sectors Year to Date is also one of the laggards on a six-month basis which incorporates the last two months of 2015.  This sector has been steadily improving given the weakness in the US Dollar which has helped the Mining sector along with Chemicals.  XLB has just broken out above highs seen back in March, along with last November/December, which puts this at the highest levels since last July.  Given the ongoing pullback in USD, further strength looks likely for Materials in Q2.
 

Technology (XLK)- Minor slowing of late near former highs should present good opportunity to buy for 1-2 months of outperformance before any Summer slowdown begins.  XLK has been consolidating right near former highs but slightly above, while relative charts vs SPX haven't declined substantially enough to expect a meaningful slowdown.  This minor relative weakness in the last few weeks appears to be down near key trendlines which should result in this sector beginning to lift back higher.  Most attractive

Industrials (XLI)- Upside might prove limited near-term given price being right under former highs- Similar to Discretionary, noone can argue the near-term strength or outperformance, but XLI lies right near former highs within .75c and relative charts have flattened a bit given the churning in the last month.  The ability to breakout back to new all-time highs would encourage following this sector and overweighting yet again, but given the move its had, it's important to be a bit more selective given that prices remain within striking distance of highs from early last year.

Consumer Discretionary (XLY)- Short-term bullish on absolute basis, while relative charts vs SPX are more neutral.  Given Monday's breakout above late March highs, XLY likely finds strong resistance near 81.23, former highs, which lie just above current levels, while relative charts have been flat and range-bound for the last few months.   While it's tough to argue the strength in this sector since mid-February, the risk/reward doesn't look as appealing in the short run, particularly given the relative churning in the relative line given that price lies $1 from former highs while momentum has waned a bit in the last month.

Utilities (XLU)- Stretched and additional mean reversion, pullbacks likely for Utilities in the short-run. Intermediate-term bullishOutsized outperformance this year now starting to wane as indices near highs and Yields beginning to stabilize- Expect underperformance between now and June as indices breakout to new high territory and yields move North.  While the broader technical pattern on Utilities remains in very good shape, momentum has gotten stretched and we've seen some evidence of near-term underperformance which could very well last another 1-2 months in this group as Treasury yields attempt to rally a bit more into June.  For now, this group is near-term unattractive, but intermediate-term bullish given the structural progress.

 

Consumer Staples (XLP)  Near-term underperformance likely-  This sector has gotten stretched, while the relative strength has slowly begun to turn down over the last month as evidence of Sector rotation took hold and flows out of Defensive sectors started to occur.  Most attractive for a risk/reward basis include: CPB, RAI, CAG, CLX, KO, PM, WMT, and TAP.

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