Last week was a good week for the market from a technical standpoint, with the S&P 500 moving ahead about 2% and pushing through two important layers of resistance. It broke above its 200-day moving average, which had been providing stiff resistance for weeks, and also broke through even stronger resistance at the 1114 level. This morning’s news that China intends to let its currency float with market demand buoyed the market at the opening, but alas, that surge didn’t even last the day. After gapping up 10 points at today’s open to eclipse its 100-day moving average, the S&P 500 plunged back down to find tentative support at its 200-day MA, and closed at 1113.
It appears that the news about the China yuan being allowed to float more freely wasn’t good enough to counter our own economic woes. May’s industrial production numbers reported last Wednesday were fairly good (1.2% versus the expected 1.0%), but the housing news for May, which also came in on Wednesday, was bad (0.593M starts vs. the expected 0.650M) and last week’s initial jobless claims were alarming (472K vs. the expected 450K).
In the mixed week that the market had (up 3 days, down 2), the cap/style stats looked all about the same, with Small-cap Value (+2.84%) coming in just a hair over the biggest laggard, Large-cap Value (+2.21%).
Among the sectors, Utilities, Industrials, Information Technology and Financials were clustered at the top, all up between +3.2% and +3.9%. Utilities were a surprising leader for an up market. At the bottom, hovering between +1.4% and +1.9%, were Consumer Discretionary, Telecom, Consumer Staples and Healthcare. Homebuilders and Building Products firms have been particularly lagging lately. Materials, which will be the biggest beneficiary of the floating China yuan, was right in the middle of last week’s stats, but it is predicted to be the leader, based on our forward-looking SectorCast.
While the market has made progress, I would act with caution, buying well priced stocks from the highest ranked sectors and selling off the laggards in your portfolio, as well as any profitable positions that are getting overvalued.
4 Stock Ideas for this Market
This week, I started with Sabrient’s Undervalued Large Cap Growth preset search on MyStockFinder. Then, I adjusted the parameters by including Small & Mid Caps and up-weighted Technicals (particularly short-term technicals). Here are 4 new stock ideas from the top-ranked sectors:
Until next week,