NASDAQ IS FIRST INDEX TO CLEAR ITS 200-DAY LINE -- STRONG BIOTECH GROUP LEADS HEALTHCARE HIGHER-- AMAZON.COM LEADS CONSUMER CYCLICALS
STOCKS EXTEND APRIL RALLY...Stocks ended the week on a strong note to extend their April rally. The daily bars in Chart 1 show the S&P 500 climbing 2.6% on Friday to close just above its 50-day average at 2863; and slightly above its late February broken low at 2855. That raises the odds for the SPX to reach its 200-day moving average (red arrow) and its 62% Fibonnaci retracement line near 2847. For the week, the SPX gained 3% versus 2.2% for the Dow and 6% for the Nasdaq. Continued buying of high-growth technology stocks has pushed the Nasdaq above its 200-day average.
NASDAQ IS FIRST INDEX TO CLEAR 200-DAY LINE... The daily bars in Chart 2 show the Nasdaq Composite Index ending the week back above its 200-day moving average for the first time since early March. It has also risen slightly above the upper 62% Fibonacci retracement line near 8634. The Technology Sector SPDR (XLK) has also climbed back above its 200-day line and has been the driving force behind the Nasdaq rally. The XLK was led higher this week by software and semiconductors. Given all of the uncertainties surrounding the Covid-19 pandemic, investors appear to be favoring high-quality growth stocks which appear more able to withstand a weakening economy. Tech was the third strongest sector for the week.
SECTOR REVIEW... Five sectors rose during the week with five showing losses. Despite a drop in the price of crude oil to another 18-year low, the energy sector squeezed out a minor gain of +0.12%. I've put that into the unchanged column for the week. Financials lost -4.2% making them the week's worst sector. Banks lost -7.8% during the week. The two strongest sectors were healthcare and consumer cyclicals. The XLV was led higher by a strong biotech group. While a record high in Amazon.com was a main driver behind the XLY's strong week.
HEALTHCARE SPDR NEARS 2020 HIGH...It's not too surprising to see healthcare stocks leading the market higher considering that's where all of the research is being done to contain (or treat) the Covid-19 virus. Chart 3 shows the Healthcare SPDR (XLV) clearing its early March high and in position to reach its previous highs reached during the first quarter. Although all of the groups in the XLV gained ground (which include health insurers, medical equipment, and pharmaceuticals), biotech was its strongest gainer and the first group to hit a new high for the year.
GILEAD HELPS PUSH BIOTECH INDEX TO 2020 HIGH.. Chart 4 shows the Dow Jones U.S. Biotechology Index breaking out to a new high for the year this past week, and the highest level since the start of 2018. A weekly gain of +14 % by Gilead Sciences (GILD) gave the group a big lift. Gilead jumped sharply on Friday after reporting encouraging results on one of its drugs in treating Covid-19.
AMAZON.COM LEADS XLY HIGHER...Consumer cyclicals were the week's second strongest sector. Chart 5shows the Consumer Discretionary SPDR (XLY) ending the week on top of its 50-day average which may lead to a move up to its red 2o0-day line (red arrow). A lot of the week's gain, however, is tied one big stock which hit a new record. Chart 6 shows Amazon.com (AMZN) jumping +16% for the week putting it in new record territory. That matters because Amazon is the biggest stock in the XLY and accounts for more than 25% of its weighting.
