Stocks take a breather; a correction is unlikely

In the last two weeks, the S&P 500 has touched and rebounded from the mid point of its prior gain twice; the last time was on Wednesday and Thursday. Friday’s down bar removed less than half of Thursday’s bullish gain and the volume was extremely low signaling very little professional interest in selling (i.e., market moves up or down are dominated by big professional players). The Dow and the Nasdaq Composite followed a similar pattern to the S&P 500.

The overall graph of strength versus weakness (i.e., cyclical versus consumer staples) has shown weakness ahead since the beginning of June. Consumer Staples including Consumer, Food and Beverage and Chemical all jumped ahead by roughly 1.5% in relative strength in June. On the Cyclical side, Automobiles, Aerospace and Transportation improved but almost everything else dropped. This biggest drops were in Machines, Basic Materials, Energy and  Real Estate. The Technology group may be starting to turn around. Only two of the sectors retreated – Semiconductors and Computer Software both lost more than 1.5% in June. Telecommunications had the biggest gains so far in June of almost 4$.

Food and Beverage Relative Strength Chart:food_beverage

Telecommunications Relative Strength Chart:telecom

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