Howard W. Penney's  Instablog

On Monday, the S&P 500 closed at 909.71, up 3.0%. Yesterday was a BIG Day for the bulls! Yesterday's performance was broad based with three of the four major indexes finishing up more than 3%; the Dow was up 2.8%, the S&P 500 3.0%, the Nasdaq up 3.11% and the Russell 2000 up 3.98%.  Driving the market higher was Financials on the back of TARP payback news and better-than-expected earnings out of the retail sector and renewed momentum with Squeesy swimming in the pool house.
 
As we ended last week three sectors had broken the TRADE line - Technology (XLK) Utilities (XLU) and Consumer discretionary (XLY).  Yesterday, Technology (XLK) and Consumer Discretionary (XLY) moved to bullish on TRADE.  For the S&P 500, the positive TRADE and TREND (820) remains. The Research Edge quantitative models suggest that 8 of 9 sectors in the S&P 500 are positive on TREND and 8 of 9 sectors are positive from TRADE duration.
 
Both the dollar index and the VIX were hit hard by the risk aversion trade; the dollar finished lower by 0.4% yesterday and the VIX tumbled by 8.7%.    Right now the Research Edge models suggest that there is 3.5% downside and 3% upside in the S&P 500.  At the time of writing, U.S. stock futures were pointing to a higher open.
 
The XLV (Healthcare) underperformed on a relative basis, closing up 1.0% to 25.58.  We are long the XLV and it remains positive TREND (24.66) and TRADE.  
 
The XLF (Financials) significantly outperformed, rising 6.5% to 12.29.   The XLF put on a strong side melt up for the bulls today; best sector in the market.  The TREND (9.37) and TRADE remain bullish.   

The XLE (Energy) outperformed on a relative basis, closing down 3.5% to 49.66.  The dollar was down yesterday, which helped place XLE as the 4th best sector on the day; bullish TRADE and TREND (45.03).    Yesterday, crude rose more than $1 to $60.21, the highest price since November and the rally looks to continue on the back of unrest in Nigeria.

The XLB (Materials) performed in line with the overall market, closing up 2.9% to 26.57; still a bull on both TREND (22.38) and TRADE.  Monsantol, which represents 18% of the XLB, underperformed rising only 0.3% yesterday.  ...  

The XLK (Technology) underperformed on a relative basis, closing up 2.7% to 17.26; TRADE rocks the bears back into their cave; back to TRADE and TREND (15.66) bullish!

The XLP (Consumer Staples) underperformed on a relative basis, closing up 2.1% to 22.84, underperforming today like it should, but TRADE and TREND (21.52) remain bullish. 

The XLY (Consumer Discretionary) significantly outperformed, closing up 4.9% to 23.22.  After a +4.9% melt up, the shorts once again feel shame; the TRADE and TREND (20.13) are back to bullish.
 
The XLI (Industrials) outperformed, closing up 2.7% to 22.60; the TREND (19.65) and TRADE remain bullish.  The Machinery stocks and Building products maker Masco (MAS) led the XLI higher.   

The XLU (Utilities) significantly underperformed the market again yesterday, closing flat on the day at 25.94. Monday was just an awful day of underperformance with the sector FLAT on a market melt up; The XLU is the only sector to trade below TREND and TRADE lines.