The Stock Market is at resistance

Gains on Monday and Tuesday were not continued the rest of the week. The 2100 price-level close on Friday for the S&P 500 has been in almost constant play since the middle of February. The fact that the price has not been able to move higher in all these months means that it would take an extraordinary positive event to do so now. This is because of all the traders who have held onto their shares, waiting for the price to increase enough so that they can sell without a substantial loss.

My table of relative strength stock sectors shows widespread losses with substantial losses in important sectors. This is a big negative divergence with the stock market that has been moving higher or sideways over the same period. Six of 11 Cyclical Group sectors were losers including the Basic Materials sectors that had been showing a gain of 3.8% and dropped to a tiny gain of only 0.1%. This sector is mirroring what senior economist David Stockman says is a world-wide gale of deflation. Other notable losses were Real Estate (-6.7%), Retail (-5%), Building (-6.4%) Automobiles (-6.7%) and Apparel (-6.9%).

Here’s the relative strength stock sector graph of Basic Materials:

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