SECTOR WEIGHTINGS IN THE S&P 500 -- KEY SECTORS LEAD WITH STRONG BREADTH -- REGIONAL BANK SPDR GETS BIG REBOUND -- FOUR BANKS WITH BREAKOUT MOVES -- STRONG JOBS NUMBER HITS EURO, BONDS AND GOLD -- ISM INDICES, AUTO SALES AND NON-FARM PAYROLLS COME IN BIG

SECTOR WEIGHTINGS IN THE S&P 500 ... Link for today's video. The four most important sector SPDRs are strong and this supports the long-term uptrend in the large-cap indices ($SPX, $NDX, $INDU). The consumer discretionary sector is the most economically sensitive sector with lots of retail oriented stocks (stores, restaurants, media, autos). The technology sector accounts for 20% of the S&P 500 and is the largest sector by far. The finance sector is the second biggest sector (16.3%) and represents the banking system. The industrials sector (10.4%) is the fifth largest sector and represents the capital equipment needed for manufacturing and services. The stock market is in good hands when these sectors are hitting new highs and their breadth indicators are strong. On a side note, the technology weighting peaked at around 35% in 2000 and the finance weighting peaked at around 22.5% in 2007.

Chart 1

KEY SECTORS LEAD WITH STRONG BREADTH... Chart 2 shows the Consumer Discretionary SPDR (XLY) hitting a new high in late November and in a clear uptrend. The ETF may be overbought after a big run the last six weeks, but it is clearly not weak. The AD Line hit a new high this week and High-Low Percent remains comfortably above +10%.

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Chart 2

Chart 3 shows the Technology SPDR (XLK) breaking above its September highs in late October and hitting new highs throughout November. Broken resistance turns first support in the 40-40.5 area. High-Low Percent exceeded 20% six times in the last three weeks and the AD Line hit a new high this week.

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Chart 3

Chart 4 shows the Finance SPDR (XLF) hitting a new high this week and showing some relative strength in December because it was the only one of the big four to hit new highs on Wednesday, Thursday and Friday. High-Low Percent exceeded +20% six times in the last three weeks and the AD Line hit a new high this week.

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Chart 4

Chart 5 shows the Industrials SPDR (XLI) breaking above its prior highs and hitting new highs throughout November. Broken resistance turns first support in the 55 area. High-Low Percent for XLI is not as strong as the other three sectors, but it remains comfortably above the zero line. The AD Line hit a new high this week and remains in a clear uptrend.

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Chart 5

REGIONAL BANK SPDR GETS BIG REBOUND... Banks seem to like rising rates because chart 6 shows the Regional Bank SPDR (KRE) moving sharply higher on Friday. I showed KRE on Monday as the ETF broke support and the Commodity Channel Index (CCI) turned bearish. This signal did not last long as KRE surged right back above the support break and gapped higher today. CCI also moved back into positive territory. This sharp move calls for a reassessment of the price chart. I would now view the decline from ~41 to ~39 as a falling flag. I drew through the late November high and Monday's low, but the essence of the pattern is there: a short correction after a sharp advance. Today's break above the flag trend line is bullish as long as KRE holds above 39.50. Chart 7 shows the Bank SPDR (KBE) with similar characteristics.

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Chart 6

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Chart 7

FOUR BANKS WITH BREAKOUT MOVES... The Finance SPDR, the Insurance SPDR (KIE) and the Broker-Dealer iShares are hitting news high as the finance sector rallies with a broad move that is lifting most boats. The next four charts show banks with bullish charts and breakouts. These stocks surged in October, stalled or corrected in November, and broke out in December.

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Chart 8

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Chart 9

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Chart 10

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Chart 11

STRONG JOBS NUMBER HITS EURO, BONDS AND GOLD... Non-farm payrolls for November surged to 321,000, which was the biggest monthly gain since January 2012. This positive news on the labor market weighed on the 20+ YR T-Bond ETF, the Euro ETF and the Gold SPDR. Bonds were down because this puts more pressure on the Fed to raise rates in the middle of 2015. The Euro was down because US economy is growing much faster than the European economy and demand for Dollars is outpacing demand for Euros. Gold was down because the Dollar was up and there is less demand for a safe haven.

Chart 12 shows the 7-10 YR T-Bond ETF (IEF) forming a lower high on Monday and moving lower this week. Support is set in the 104 area and a break here would be bearish. Money moving out of bonds could find its way into the stock market before yearend. The indicator window shows the 10-YR Treasury Yield ($TNX) forming a higher low and making a bid to break resistance.

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Chart 12

Chart 13 shows the Euro ETF (FXE) in a strong downtrend defined by a Raff Regression Channel. Key resistance is set at 125 for the Euro and key support is set at 23.2 for the US Dollar ETF (UUP).

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Chart 13

The Gold SPDR (GLD) has been quite volatile the last few weeks, but the overall trend has always been down and I view the bounce to 116 as a bear market rally. Chart 14 shows GLD hitting 52-week lows in September, October and early November. New lows happen in downtrends, not uptrends. The ETF bounced back to the 117 area, but is not even close to the mid October high. The Raff Regression Channel and the October high mark resistance in the 120 area. With the ETF stalling near the 62% retracement line, this is as good a spot as any for the counter trend bounce to end and the bigger downtrend to resume.

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Chart 14

ISM INDICES, AUTO SALES AND NON-FARM PAYROLLS COME IN BIG... The economic cup is clearly half full and this is positive for stocks overall. The ISM Manufacturing and Services Indices continue to knock the ball out of the park. Of note, the ISM Manufacturing New Orders Index surged to 66 and the ISM Services Business Activity Index has been above 60 since July. Anything above 50 points to economic expansion and these two have been above 60 since July. Talk about strong! Auto-Truck sales were also exceptionally strong and the annual rate exceeded 17 million for the second time this year. On the employment front, ADP Report showed an increase of 208,000, which was below expectations. Even so, job growth has averaged over 200,000 a month for the entire year. More importantly, non-farm payrolls increased a whopping 321,000 and blew out expectations. This is very positive for the economy and could boost the next retail sales report.

Chart 15