HEALTHCARE SECTOR WEAKENS AFTER SUPREME COURT UPHOLDS OBAMACARE -- INSURERS FALL WHILE HOSPITAL OPERATORS SURGE -- S&P 500 NEARS TEST OF SUPPORT -- COMMODITIES SLUMP ON RISING DOLLAR -- BOND YIELDS CONTINUE TO DECLINE
FALLING BOND YIELDS WEIGH ON STOCKS... Bond yields continue to drop. Chart 1 shows a downtrend line defining the last downleg in the 10-Year T-Note yield that started in mid-March. After consolidating throughout most of June, the TNX may be on the verge of falling even further. The hourly bars in Chart 2 show the TNX nearing a test of its mid-June low near 1.56%. A close below that level would signal even lower bond yields. While that would be good for bond prices, it's probably bad for stocks. Treasury yields are falling on eurozone fears and a weakening U.S. economy.
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Chart 1
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Chart 2
COMMODITIES CONTINUE TO DEFLATE ... Another factor pulling bond yields lower is commodity deflation. Economically-sensitive commodities are falling the hardest -- including oil, copper, and silver. Chart 3 shows the U.S. Oil Fund (USO) testing its October low. Chart 4 shows the Copper ETF (CU) heading in the same direction. Chart 5 shows Silver Trust (SLV) slipping below its December low. Gold is nearing a test of its lows as well. Commodity weakness usually translates into stock weakness because it implies lack of global demand and economic weakness. A rising U.S. dollar is contributing to commodity weakness.
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Chart 3
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Chart 4
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Chart 5
NORTH AMERICAN DOLLARS TREND IN OPPOSITE DIRECTIONS ... The U.S. dollar continues to attract safe haven forex money. Chart 6 shows the Power Shares Dollar Index Bullish Fund (UUP) continuing to rise. One of the foreign currencies falling the hardest is the Canadian Dollar. Chart 7 shows the CDW nearing a test of its June low and in a clear downtrend. That shows loss of confidence in commodity prices and global stocks.
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Chart 6
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Chart 7
S&P 500 NEARS TEST OF SUPPORT... Global stocks are falling today. Chart 8 shows the S&P 500 nearing a test of initial chart support near 1310 (see trendline). The hourly bars in Chart 9 show the short-term "head and shoulders" formation having formed over the last month with a "neckline" drawn under June low. A decisive close below 1310 would signal a likely retest of its early June low. The SPX would have to exceed Wedneday's high near 1335 to lessen that downside threat. [The hourly bars in Chart 9 show a late bounce in the S&P 500].
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Chart 8
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Chart 9
HOSPITAL OPERATORS SURGE AND INSURERS PLUNGE ON SUPREME DECISION... Today's Supreme Court decision upholding Obamacare resulted in a weaker healthcare sector. Chart 10 shows the Health Care Sector SPDR (XLV) losing more than 1% today and showing signs of stalling at resistance along its April high. This has been one of the market's most resilient sectors throughout the spring. More dramatic (and opposing) reactions were seen in two healthcare groups. Hospital operators surged while health insurers tumbled. Chart 11 shows Tenet Healthcare (THC) soaring 5% on huge volume. By sharp contrast, Chart 12 shows Wellpoint (WLP) tumbling an equal amount on huge volume. The Supreme Court upheld the Affordable Care Act by ruling that the individual mandate is really a tax. That will make the resulting tax hike one of the biggest in U.S. history. Tax hikes aren't good for the economy or the stock market.
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Chart 10
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Chart 11
