Energy still resilient but expecting June peak as Tech bottoms

Key Takeaways

  • Stabilization within a trend does not equal “Rally-time” Trends remain under pressure
  • Energy remains the best performing group, and while stretched, still looks to offer alpha into mid-June;  Exploration and Production sub-sector looks most promising

Minor stabilization does not equate to a bullish trend change   SPX showed some minor degree of holding up post FOMC minutes and allowed for this recent churning to continue.  This indecision has been frustrating to bulls and bears alike, but commonly represents a Wave Four type move from an Elliott-wave perspective.  As discussed, momentum has begun to show readings that are not as negative as two weeks ago. However, US indices have shown no evidence of trend change, and recouping 4100-4114 resistance zone is thought to be the most important towards signaling a change in trend.  (Even short-term levels like 4000 were not even exceeded on Wednesday) Defensive groups like Utilities and REITS have outperformed in recent days, the exact opposite kind of sector performance that would be thought likely ahead of a big rally.  Near-term, the path of least resistance remains to the downside, and I’m expecting a test and brief undercut of 3810 into the end of May/early June which might usher in a more meaningful structural low than what we’ve seen this past week.

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