Discretionary extending run after breakout vs. Staples

Markets have ground higher in a way that seems perplexing to most investors who don’t utilize technical analysis.  While many are concentrating on earnings, or the endgame for Fed rate hikes, or studying 200-day moving averages (m.a.), Equity indices have successfully rallied above meaningful downtrend lines while many sector ETFs like Financials, Discretionary, Materials and naturally Communication Services have pushed to the highest level in months (Energy is not too far behind in this regard).

While I doubt US equity indices will be able to extend straight up into and through the FOMC meeting without any consolidation, it does look likely that a rally into next week can happen, with most dips being immediately buyable. 

Interestingly enough, Treasury yields have undergone consolidation over the last two weeks while Equities have pressed higher.  At Thursday’s close of 3.498%, this level was higher than this time two weeks ago on 1/12 when $TNX closed at 3.445%.  The recent strong negative correlation between Yields and Equities has not resulted in Equities selling off on a bit of bounce in yields.  Overall, though, this represents just a minor bounce and nothing too serious technically.

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