STRONG JOBS REPORT BOOSTS STOCKS -- S&P 500 NEARS MAY HIGH -- QQQ REACHES TWO-MONTH HIGH -- INTEL AND ALPHABET ARE LEADING IT HIGHER -- AMGEN LEADS UPTURN IN BIOTECH ISHARES -- HEALTHCARE SPDR APPEARS TO BE BASING
S&P 500 NEARS MAY HIGH... A stronger than expected jobs report for May is giving a boost to stocks today. So is the fact that European stocks are rising (as well as Italy's bond and stock markets). In addition, yesterday's stock selling in response to new tariffs was relatively mild which is also encouraging. The bottom line is that stocks are having a strong day today and are starting the month of June in a stronger technical condition. Chart 1 shows the S&P 500 ending the week on a strong note and on pace to challenge its May high near 2742. A close above that level would restore the market's uptrend. There are three other encouraging signs on Chart 1. One is the fact that Tuesday's Italy-inspired selloff bounced off its 50-day average. The second is that the SPX also bounced off the falling trendline drawn over its January/March highs. That resistance line was exceeded three week's ago to the upside. One of the rules of chart analysis is that a resistance line once broken on the upside should act as a support line on subsequent pullbacks. The black arrow shows it doing just that on Tuesday. The third positive sign is the ability of the 14-day RSI line (top box) to stay above the 50 level. That's usually a sign of rising momentum. Nine sectors are in the black today being led by technology. Consumer staples are lagging. Utilities are the day's biggest losers owing to a rebound in Treasury yields. Today's rebound in stocks is causing some selling of bonds and bond proxies. That also suggests that Tuesday's flight to safety into Treasuries may have run its course.
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Chart 1
INTEL AND GOOGLE LEAD NASDAQ 100 HIGHER... The PowerShares Nasdaq 100 (QQQ) continues to lead the market higher. Chart 2 shows the QQQ rising to the highest level since mid-March and on pace to retest its March high. The QQQ/S&P 500 ratio (top box) has already reached a new record. That's usually a good sign for both indexes. Internet and semiconductors are leading the technology sector high. Chart 3 shows chip bellwether Intel (INTC) hitting another record high to lead that group and the QQQ higher. Chart 4 shows Alphabet (GOOGL) also achieving a bullish breakout today. Biotechs are contributing to the Nasdaq rally.
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Chart 2
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Chart 3
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Chart 4
AMGEN LEADS BIOTECH ISHARES HIGHER ... Chart 5 shows biotech bellwether Amgen (AMGN) reaching the highest level in more than two months. The biotech leader has also risen above the falling trendline drawn over its January/March highs. Chart 6 shows the Nasdaq Biotechnology iShares (IBB) also reaching the highest level since March, and clearing its four-month resistance line as well (see circle). Most biotech shares are traded on the Nasdaq market and are helping support that rally. An upturn in the biotech group could also give a much-needed boost to the healthcare sector.
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Chart 5
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Chart 6
HEALTHCARE SPDR MAY BE BASING... Rising biotech shares may give a lift to the healthcare sector. It could sure use one. Chart 7 shows the Health Care SPDR (XLV) in a flat trading pattern since the start of April, which looks like a potential bottom in the making. The XLV peaked in late January and continued to drop until the end of March. It then broke its falling trendine in late April, which turned its trend from down to sideways. That's how corrections usually end and bottoms are formed. To complete that bottom, however, the XLV needs to clear its flat upper trendline. That would also give a boost to the rest of the market. That's because healthcare is the third biggest sector in the S&P 500. Its 13% weight in the SPX is third only to technology (26%) and financials (14%). And it's been one of the sectors holding the rest of the market back. An upside breakout by the XLV would be good for it and the S&P 500. Some healthcare stocks are already looking a lot stronger.
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Chart 7
MEDTRONIC, IDEXX LABS, AND MERCK ARE RISING ... Medical equipment stocks have been the strongest healthcare group this year, which includes Medtronic (MDT). Chart 8 shows that stock nearing the top of a trading range that's existed for the past year. And it appears to be on the verge of a major upside breakout. Medical supply stocks have also done relatively well this year, which includes IDEXX Laboratories (IDXX). Chart 9 shows that stock in a strong uptrend all year and on the verge of reaching a new record. Pharmaceutical stocks have been the weakest part of the healthcare sector. But there may some bright spots there as well. Chart 10 shows Merck (MRK) rising to the highest level in a month and nearing a test of its April high. It's also nearing a test of a falling trendline extending back to last September. Biotechs have been second weakest part of healthcare this year. Today's upside breakouts suggest that group may be getting better. An upside breakout by the XLV would make for a healthier stock market.
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Chart 8
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Chart 9
