There is underlying strength in the stock market

Stocks sank last week continuing the previous week’s down step. The Dow lost the most on Friday and broke it’s bullish trend line that began in early February. The S&P had a down thrust on Friday that closed just a little bit under the bullish trend line. Down thrusts are bullish signals. The Nasdaq composite is stronger than both the DOW and S&P. It’s Friday down thrust closed as a gain. Money moving out of the defensive conglomerates of the Dow into technical  companies is bullish. It suggests that the stock market may be getting ready to end, in a positive manner, the sideways movement it has been in since late February.

 

My overall chart of cyclicals divided by consumer staples shows the cyclicals more powerful beginning last week. This was mirrored by the improvement of a number of individual sectors including Transportation, Building, Leisure, Retail, and Apparel. There was a sizable drop in the Utilities sector. This, like the money coming out of the Dow, means less defensiveness in the stock market. A big drop in the Energy sector is very positive for the economy if it is seconded by a drop in the price of gasoline , natural gas and crude oil.

 

Here’s the relative strength chart of the energy sector:energy

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