This is getting interesting as investors continue to look for some indication all is well. The last two days of trading as been like watching paint dry. Nothing bad, but then nothing good relative to a follow through for the major indexes. I am not complaining mind you as it is better than some of the neurotic movement we have seen the last couple of months. For now we just remain on the patient side of the table and see how it unfolds moving forward.
Utilities bounced back from the selling gaining 2.3% on the day… what changed? The FOMC minutes offered some consolation that the Fed is unanimous on delaying the hike in interest rates to later rather than sooner. This offered some peace of mind relative to interest rates and that in turned helped investors feel more comfortable with the horizon and owning utility stocks at least for now. The sector holds support at the $44.75 level and $46.50 resistance on the bounce in the next hurdle to jump if the bounce is going to be anything more than a bounce. Still not a buyer or trader for now, willing to let it determine how it will flow short term. The FOMC minutes also helped the bond sector stop the downside move and hold for now. Still not sure it is out of the woods yet.
Industrials and consumer staples were higher on the day as the defensive sectors step up the buy side. The have also been lagging the other sectors in the current move and willing to see how this unfolds as well. If the defensive sectors take the lead that is not a good sign for the break higher and continuation of the uptrend.
Energy lost 1.1% on the day as crude moved down 2.9%. This is like the old Atari game Pong when you would have two paddles and a white ball on the screen you could hit back and forth like tennis except in slow motions. The challenge for energy remains the uncertainty relative to price and which direction crude will move. As with the broad markets… patience is the only advice we all need for now. It will unfold and the trades in the sector have worked well short term as we stated, but now we determine if there is any conviction behind the moves. XLE held above the $80.50 level for one positive and we watch to see how tomorrow unfolds.
Financials gave up some ground on the day, but held above the $24.20 mark on the close. Watching for some upside in the sector as it remains a sector stuck in regulations and uncertainty about earnings. The regional banks offer some positives looking longer term if interest rates move higher. The drag today came on the heels of the FOMC minutes stating the Fed will be patient on hiking rates. Again with the Fed procrastinating nor offering some clarity in direction and time. Watch for the sector to hold support or it could push towards another test of the February lows.
TAN or solar has been one of the bright spots in energy sector, but fell after-hours on news and data from Solar City (SCTY). Semiconductors will have to deal with news from SunEdison (SUNE) which also disappointed on earnings. Both sectors had made solid moves towards the highs and were showing signs of leadership for the broader indexes.
Worry is still the buzzword of the day and we will watch to see if any new action takes place tomorrow or if we continue to tread water. Stay focused on the objective and manage your stops to control any downside risk should it arise.