The Stock Market is Still Defensive

The DOW retreated from resistance stemming from the March 2 high. The Nasdaq Composite, on the other hand, struggled to move above the April 27 high. The S&P is the strongest of the three because it is above both the early March and late April highs. But, it made virtually no progress last week. Big forward steps are seen when markets break out when powerful demand is present and little selling pressure. The sluggish action I wrote about last week is still present due to a balance between selling pressure and demand.

The chart of cyclicals divided by consumer staples is much weaker (it’s well below its recent highs meaning the staples are stronger) than the major stock indexes. Six of eleven sectors in the Cyclicals Group lost strength since May 1. Of those that gained, it was concentrated in Leisure and Machines. The Technology Group exhibited a similar spotty record as half its sectors lost.

The sluggish nature of the stock market is only apparent on the daily charts; the weekly charts remain solidly bullish. Money can be made in this market but keep your stops tight and monitor your holdings closely.

Here’s the relative strength chart of the Telecommunications Sector: telecom

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