AAPL gains fuel Technology but many indices, sectors have not broken out
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Key Takeaways
- Despite Friday’s gains, the short-term trend in Equities still shows lots of consolidation ahead of next week’s FOMC. It will take a rally above 4744 to get the Bull back on track, while under 4612 will bring selling pressure down to at least 4450 into 12/24
- Technology along with Healthcare, Industrials, Financials all look to churning near meaningful resistance and might be difficult to expect follow-through ahead of FOMC
- Sentiment showing the largest spread of Neutral readings in about two years
Despite Friday’s AAPL inspired rally, most indices and sectors still have lots of work to do. S&P and Nasdaq remain up near November highs, while Value Line has found resistance near the area of its 11/29 Gap, which was filled before Thursday’s reversal. Overall, this week has produced the best week of gains since February, but yet charts on many sectors don’t look nearly as bullish as this statistic might imply. Friday’s hottest CPI print since 1982 on Friday failed to lift indices up above materially in a way to think a seasonal rally back to highs had begun. Key will be 4744 on the upside, while 4665 and 4612 are meaningful areas of support for SPX. Until/unless 4744 is exceeded, it’s still expected that pullbacks are a possibility.
Technology grinding sideways near November highs looks important to watch
As discussed, Technology joins the ranks of the sectors up against significant levels that is causing some stalling out of this trend this past week. AAPL of course provided a notable boost to markets given its near 11% gains, (and SWKS, AVGO, FB all rose more than 7% as well) Given that FOMC meets next week, it will be tough to expect much of a breakout ahead of this meeting, technically, and most Equal-weighted gauges are in worse shape than SPX or NDX, which barely declined 5% before rebounding. Overall, it will be important to keep a close eye on resistance in S&P, and NASDAQ into, and after FOMC.
Sector performance tells an interesting story
Weekly SPX GICS Level 3 performance shows the top-performing groups of the past week, and interestingly enough, more than half of these were down in the last month. Some of the weakest groups over the last month like Airlines and Entertainment both rebounded over 1.5% this past week, while Personal products, Tech Hardware Storage and Healthcare Providers and Services all jumped more than 5%.
Of the 10 hardest hit groups in the last month (all down -4%) more than half of these rose more than 1.5% this week which seemed encouraging. Yet still lots of weakness within Autos near-term and Media, which fell another 5%, and these two were the worst performing groups.
Overall, some scant evidence of a Defensive push this past week in Staples, while Utilities turned in better performance than the Financials or Discretionary. Yet, Technology dominance remains the most important factor to explain market gains at a time when half the major S&P SPDR ETF’s: Materials, Energy, Industrials, Financials, and Communication Services were lower over the last month on a rolling 1 month percentage basis.
AAII rankings released Thursday show Neutral rankings now at the highest levels seen in the last two years. Bulls have gradually increased to levels near where Bears are, both near 30%, or Flat, but neutral readings are up to 39.8% as of 12/9/21. This makes a lot of sense in a time when broader markets have shown some technical damage since 11/18 while FOMC Tapering is set to occur and causing understandable jitteriness. Normally this might be seen as Bullish, but the price action still requires some improvement to put the Bulls back into the “Driver’s Seat”
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