STOCKS RALLY ON INCREASED HOPE FOR A RATE CUT -- S&P 500 REGAINS 200-DAY LINE -- TECHNOLOGY AND CYCLICAL SPDRS HOLD THEIR 200-DAY LINES -- WHILE FINANCIALS, INDUSTRIALS, AND MATERIALS REGAIN THEIR RED LINES -- VIX FALLS FURTHER BELOW 20
S&P 500 TRADES BACK OVER ITS 200-DAY AVERAGE... A combination of a short-term oversold condition and dovish sounding comments from the head of the Fed are giving a big lift to stocks today. All major indexes are are showing strong gains with the Nasdaq in the lead (+2.3%). The Dow and S&P 500 are also seeing big gains well. Chart 1 shows the S&P 500 up more than 50 points today (1.86%) in afternoon trading. Its 14-day RSI line (upper box) is bouncing off oversold territory at 30. In addition, the SPX is bouncing off potential chart support at its March low near 2722. Nine sectors are in the black today, with percentage gains in excess of 2% in technology, materials, financials, consumer cyclicals, and industrials. The only two sectors on the red are defensive utilities and REITS. Safe haven Consumer staples are also lagging behind.
SECTORS HOLDING OR REGAINING THEIR 200-DAY LINES... Charts 2 and 3 show the Technology and Consumer Discretionary SPDRS bouncing off their 200-day lines. Semiconductors are leading techs higher, while autos are helping boost cyclicals. Charts 4 and 5 show the Financial and Industrial SPDRs climbing back over their 200-day lines today. Banks are leading the financials higher. A strong transportation group is boosting industrials. Chart 6 shows the Materials SPDR (XLB) also regaining its 200-day line. It's being led higher by stocks tied to copper. A rebound in bond yields is also giving a boost to financial stocks, while hurting dividend-paying stocks. And signalling some profit-taking in an overbought bond market. Increased hopes for a rate cut are weakening the dollar and giving a boost to commodity prices; and stocks tied to them.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
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Chart 5
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Chart 6
VIX INDEX RETREATS FURTHER BELOW 20 LEVEL... Today's stock buying is pushing the CBOE Volatility (VIX) further below resistance at 20. The VIX is down -7% today and trading below 18. The inability of the VIX to climb back above 20 yesterday helped contain the short-term damage done to the tech sector; and to the rest of the market that suffered smaller losses. Today's pullback in the VIX is helping support the day's strong stock gains. That includes foreign stocks.
EAFE ISHARES REGAIN 200-DAY LINE... Chart 8 shows the MSCI EAFE iShares (EFA) also climbing back over its 200-day line today. That includes foreign developed stocks in countries outside of North America. Some of today's biggest EAFE gains are coming from Europe. Emerging Markets iShares (EEM) are also bouncing, but remain below their 200-day lines.
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Chart 7
