The Stock Market is Defensive in Spades Despite the Recent Gains

The stock market continued its sideways move. Only the Nasdaq gained; but all dropped on high volume on Friday. Friday’s range was not commensurate with the higher volume. The volume was huge in the DOW on Friday, about double the average. One explanation for this pattern is a relatively even struggle between buyers and sellers. The Nasdaq Composite has still not closed for the week above the March 27 high.

The chart of cyclicals divided by consumer staples shows weakness for the cyclicals and strength for the staples over the last couple of weeks. This defensive stance is confirmed by the stock sector table showing a large increase in relative strength for the Consumer Staple Group, only the Finance Group was higher. The Technology Group and Cyclicals Group came in a distant third and fourth in that order. The Utilities Sector, a key defensive barometer, zoomed higher by 5% since the beginning of June.

There were bright spots, not everything was gloomy. The Building, Leisure, Apparel, Bio Technology, Computer Software and Technology Hardware sectors all had solid gains while the Energy sector fell significantly (this is predictive of lower gasoline costs).

Here is the relative strength chart of the Utilities Sector:utilities

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