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“Common sense is very uncommon.” – Horace Greeley
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It was a positive tone heading into weekly jobless claims, and futures have remained higher following an inline report. Initial claims were in line with forecasts at 232K while continuing claims were slightly lower than expected (1.863 mln vs 1.870 mln). In Europe this morning, equities are also trading higher following a stronger-than-expected composite PMI report which was goosed mainly by the Paris Olympics.
Outside of Energy (XLE), large-cap sectors have performed admirably over the last five trading days. Of the eleven sector ETFs shown below, only Energy has declined and Real Estate (XLRE) is the only other sector failing to rally more than 1%. At the top of the list are Consumer Discretionary (XLY) and Technology (XLK) which have both rallied nearly 5% or more. Behind those two leaders, four other sectors have rallied more than 2% while three sectors have gained more than 1%. Ten out of eleven sectors are above their 50-day moving averages with six in overbought territory (1+ standard deviations above their 50-DMA) and another two sectors – Consumer Staples (XLP) and Health Care (XLV)– trading in extreme overbought territory (2+ standard deviations above 50-DMA).
From the highs in late March through now, the S&P 500 has experienced a V-formation where the magnitude and speed of the bounce was a mirror image of the decline, and the charts of both Consumer Discretionary (XLY) and Technology (XLK) illustrate that pattern.
While Consumer Discretionary (XLY) and Technology (XLK) have followed the pattern of the broader market, most other sectors have followed their own unique paths. Energy (XLE), for example, has missed out on most of the rally, remaining well off of its late July highs.
At the other end of the spectrum, if you look at the charts of the Consumer Staples (XLP) and Utilities (XLU) you would never even know that there was a decline in the first place. In the years coming out of the Financial Crisis right up until Covid, investors became used to sectors moving closer in unison to each other, but as the last several weeks have illustrated, it’s not always a tide that lifts and sinks all boats.
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