STOCKS START WEEK ON THE UPSIDE -- ALL STOCK SECTORS ARE GAINING -- BIOTECHS LEAD HEALTHCARE HIGHER -- TREASURY YIELD BOUNCES AS TREASURIES DIP -- CORPORATE BONDS ARE ACTING BETTER
S&P 500 MAY BE HEADED FOR TEST OF LATE-MARCH HIGH...Global stocks are starting the week higher. The daily bars in Chart 1, for example, show the S&P 500 gapping higher this morning and clearing its green 2o-day average. The green circle shows the SPX leaving the last three days of trading behind in a small "island reversal". Those are positive signs, and increase the odds for the SPX to challenge its late March intra-day high at 2641. That would also represent a retest of its lower 38% Fibonnaci retracment line. Closes above those levels would strengthen the market's short-term trend. All eleven sectors are positive today led utilities, materials (led by copper producers), cyclicals, technology, real estate, industrials, and financials. Biotechs are lead healthcare higher.
BIOTECH LEADS HEATHCARE HIGHER...With the coronavirus being the main factor effecting stock prices, it's not a surprise to see heathcare stocks showing a stronger chart pattern. The daily bars in Chart 2 show the Health Care SPDR (XLV) trading slightly above its late March high and in position to reach its 200-day average. Chart 3 shows the Nasdaq Biotech iShares (IBB) trying to clear its 200-day line. Medical equipment stocks are also doing better.
SOME PROFIT-TAKING IN TREASURIES -- CORPORATES DOING BETTER...Treasury yields are higher today which translates into some profit-taking in safe haven Treasuries. Chart 4 shows the 10-Year Treasury yield rising 7 basis points today to .65%. That rebound is also starting from a higher level than its early March low. Chart 5 shows the 20-Year Treasury Bond iShares (TLT) meeting some selling. Corporate bonds have been doing better lately. Chart 6 shows the iBoxx Investment Grade Corporate Bond iShares (LQD) moving up toward its 200-day moving average line. High yield bonds are trading higher today, which also suggests a bit more optimism.
WHAT DOES IT MEAN?... A lot of strategists believe that stocks may be bottoming and will rebound at the first sign that the coronavirus is easing. At the same time, the short-term stock picture continues to improve. Despite concerns about the economic shut-down, investors are hanging in there hoping that things will get better. It may be too soon to make that judgement call. But today's higher stock trading (along with better performances by some riskier assets) is an encouraging sign. Gold and copper are bouncing today, while crude oil is lower. The U.S. dollar is relatively flat.
