The S&P 500 index finally made a break through the 2040 ish level that has been testing the index for more than a week. As we discussed in the video updates last night this has been a consolidation or what I call an in place correction. Investors have been digesting the move since completing the ‘V’ bottom pattern and now looks ready to move higher. Why seems to be the number one question asked today? The answer can be whatever you want as you look across the landscape of the US and global markets. The data globally has been better today, but that doesn’t necessarily mean things are better. There is a sentiment of improving for the retail sector, the housing sector, the financial sector and the basic materials sector. That puts investors in a buying mood and that was the catalyst for the move. I believe the bigger question is sustainability… can it hold and go higher moving forward? Time will tell and for now we watch, listen and act accordingly. The chart below is the S&P 500 index which shows clearly the move from the five days of sideways movement. The break comes with modest volume which is always suspect, but the move was on the upside nonetheless.
Breaking down the parts of the index to see what is moving we find the usual suspects of leadership. Healthcare (XLV) is the key mover on the day as it cleared the consolidation from the last three weeks and broke to a new high. As seen on the chart below this was the first sector to clear the September highs and follow through to new highs. However it started moving sideways the last day of October and has been stuck ever since. The gain today was a positive for the sector and comes with the help of the biotech sector (IBB) which as continue to provide leadership to the broad index. Pharmaceuticals (XPH) also returned to the upside adding a nice gain on the day as well. Healthcare providers (IHF) pushed back to a new high on the day as the buyers were willing to put money to work across the sector and maintain the leadership.
Basic materials broke through resistance at the $48.75 level and continued to trade higher the last two weeks with a nice acceleration day on Tuesday. There is still room to run to reach the September highs as resistance. Likewise industrials broke higher from the six day consolidation near the current highs to assist in the broad index of the S&P 500 hitting new highs.
Technology (XLK), consumer staples (XLP) and consumer services (XLY) are the other leaders on the upside as they have not missed a beat on the trek higher. Plenty of leadership for the index overall to keep the upside in play. The financials (XLF), utilities (XLU), telecom (IYZ) and energy (XLE) have been the laggards on the move.
We have to take it one day at a time, but the focus is on the upside. The sentiment remains on the positive side overall and the outlook from most analyst is positive. There is always the doom-and-gloom view of what is wrong with the markets and the economy, but until the trendline break and the sellers emerge this remains a buyers driven market. Keep your stops in place and your eyes on the charts for any reversals or challenges that may occur moving forward, but until then keep rowing your boat.