Stocks Move Within Striking Distance Of The January Record High

Financial Stocks Power The Market Higher

The stock market went up big on Monday as it continues its recent run. The S&P 500 and the Nasdaq were both up 0.88%. The biggest trend on the day was the outperformance of the Dow compared to the Russell 2000. This shows us the trade war jitters have passed for the moment. The Dow was up 1.31% and the Russell 2000 was up 0.62%. This was a sell the rumor, buy the news trade as stocks were up the most since March 26th.

The best part about this rally is the S&P 500 is just 2.67 points away from the recent June high, while simultaneously not being overbought. The 14-day relative strength index is at 52.37 which is a neutral reading. The CNN Fear and Greed index is at 49 out of 100 which is also a neutral reading. The S&P 500 should have no problem passing the March and June double top. This means this is the going to be the best attempt at surpassing the all-time high in January. Weakness in emerging market stocks suggest it won’t make new highs; the strength in mid-caps and small caps suggest it will make new records.

As I mentioned many times, the S&P 500 needs help from the financials to break out of its 5-month range. It got that help Monday as the financial sector was up 2.29%. If you glance at the 1-year chart of the XLF , this only looks like a blip up in a downtrend, similar to the Shanghai index.

It was an interesting day for other sectors besides the financials. The consumer staples were down 0.38% which is a sizable underperformance. Since the sector’s bottom on May 3rd until Friday, it was up 6.61%. That was an oversold rally. With the ‘risk on’ action today, the sector sold off. Telecom and utilities sold off even worse as they were down 1.42% and 3.13% respectively. To complete the point about how this rally was based on the tariffs being all bark and little bite, the industrials sector was up 1.81%. Caterpillar stock was up 4.11%. That’s a big countertrend reversal as the stock fell 15.02% from June 12th to July 3rd.

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