After shaking off the mid-February bout of distribution, the bulls hit the gas last week, pushing the indices to fresh highs and extending their gains into week’s end after some pretty good jobs numbers Friday morning. Our chart review shows plenty of individual stocks exuding strength, and that carries through to the broader sector ETFs. Meanwhile, several potential short setups have squeezed those looking for trades on the dark side.
In particular, the Materials Select Sector SPDR
(NYSEARCA:XLB), which was looking very shaky for a while there after breaking down technically and seeing an oversold bounce right into the wrong side of its 50-day moving average, is back to within spitting distance of multi-year highs. One aspect of the sector strength / weakness profile that’s been a bit of a head-scratcher is continued outperformance in staples and health care, both of which are defensive in nature. Regardless, this market has been firing on all cylinders, and the bulls finally got some solid data to back them up.
That’s not to say it’s all butterflies and rainbows. After six straight up-days, the indices are quite extended here, and the negative divergences my firm has been watching develop over the past couple of weeks are still there. The S&P 500
(INDEXSP:.INX), meanwhile, is bumping up against rising resistance.
Also, one area we consistently track is the percentage of stocks in the S&P 500 that are above their respective 50-day moving averages. We’re not in nose-bleed territory like we were in late January, but it is in the “yellow-zone” over 80.
Finally, we don’t spend much time talking about valuations, but Bespoke has a great post
looking at the current PE ratios of the S&P 500 and several major sectors.
(Chart courtesy of Bespoke)
Whether any of these things end up mattering remains to be seen. Remember, these divergences and percentages and muckety-mucks are all things to pay attention to. Ultimately, price is the only thing that matters, and right now, the pricing action is strong.
The challenge, of course, is finding good entry points for individual trades, but that’s exactly what we’re going to keep digging for. With that said, here are a couple names we have on our radar for this week:
Alon USA Partners
No positions in stocks mentioned.
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