SPY has been contained in a range for 28 trading days, since breaking above 239.50 the last week of May. Bearish traders point to possible distribution, after nearly 20% gains from the November lows. Either way, price will tell us what to do.
Is the sun about to set on this bull market run?
Is the current bull market over? Is this distribution or normal sector rotation. Some suggest summer seasonality is creeping into the markets a little early; with August typically boasting one of the weakest months of the year.
That said, earnings have been very good and little has changed. Growth stocks (tech) have been laggards, while value stocks remain in play. If the latter gains momentum, anticipate strength in XLB, XLE, XLF, XLI, XLV and XLY.
Healthcare providers were very strong on Wednesday.
Healthcare was pretty strong yesterday. Providers, medical devices, pharmaceuticals and biotech stocks all gained on Wednesday. Additionally, TICK cumulative is still rising, suggesting we are seeing rotation. SOTEMA is flat as expected, as this range bound consolidation persists into July.
Considering the tight range, price action is bouncing off the pre-market, session lows at 241.7, as we go to print.
TICK Cumulative Rising Suggests Rotation
Note: Tick cumulative continues to rise, in a systematic stepping motion, as it drifts higher then fades for several days. We’re anticipating the same this week, as the fade already started.
If sector strength continues in XLE this morning and crude continues higher (+1.50%), SPY might trap some bears expecting a test of 239.96, the recent low on Thursday June 29. In addition VIX is higher, so traders are adding protection this morning. XLF and XLK are giving back part of Wednesday’s gains as well.
With TICK cumulative rising, we will assume the bulls are still in charge. If this changes we will reassess at that time. For now, we’ll look for relative strength candidates for any new trades from the watch list and continue to take profits into strength where appropriate.
Welcome to the new members.
Happy Thursday,
Vinny