US STRATEGY – UGLY INTERNALS

The S&P 500 is up for three days in a row, rising 0.1% yesterday.  While the market had an “up” day yesterday, the internals of the market deteriorated.  Yesterday, the Financials broke TREND and is now broken on both durations.  Over the past month the XLF has declined 2%, while the S&P 500 is up 2.2%.

 

The S&P 500 rallied for much of the day on a renewed focus on the global recovery theme, as the World Bank boosted its 2010 China GDP forecast.  Also, the market seem to benefit from the Fed's decision to not make any meaningful changes to interest rates or and changes to its policy statement. Although, trading following the FOMC decision was fairly choppy and the indexes saw a meaningful pullback in the last half-hour or so of trading. 

 

On the day the VIX declined 3.8%, also declining for the second day in a row.  The UUP, the etf used to track the dollar index, was down 0.7% on the day.

 

The three best performing sectors were Healthcare (XLV), Utilities (XLU) and Technology (XLK), while Energy (XLE), Industrials (XLI) and Financials (XLF) were the bottom three.  All of the bottom three sectors were down on the day. 

 

The Healthcare (XLV) moved higher for the second straight session with the HMO’s leading the way.  Yesterday’s performance was largely driven by thoughts that Republican wins in the NJ and VA governor races could dampen the appetite for aggressive healthcare reform. There is even some speculation that reform legislation may be pushed back to next year. 

 

The Financials (XLF) was one of the worst performing sectors yesterday, closing down 1.4%. The regional banks remained under pressure on capital and CRE concerns.

 

The Consumer Discretionary, especially retail stocks lagged the broader market again yesterday with the etf closing flat on the day.  The underperformance came despite an upbeat tone to today’s release of October same-store sales.

 

Today, the set up for the S&P 500 is: TRADE (1,064) and TREND is positive (1,027).   The Research Edge quantitative models have 6 of 9 sectors in the S&P 500 positive on TREND and 1 of 9 sectors are positive from the TRADE duration.  Consumer Staples is the only sector positive on both durations and the Financials broke TREND. 

 

The Research Edge Quant models have 2% upside and 2% downside in the S&P 500.  At the time of writing the major market futures are poised to open up to the upside. 

 

The Research Edge MACRO Team.

 

 

US STRATEGY – UGLY INTERNALS - SPCHARTthurs

 

US STRATEGY – UGLY INTERNALS - s pperf


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