ENERGY, MATERIALS, INDUSTRIALS, AND HEALTHCARE LEAD STOCKS HIGHER -- CATERPILLAR AND DEERE ARE XLI LEADERS -- ALIGN TECH AND UNITEDHEALTH ARE XLV LEADERS -- STOCKS CLOSE STRONG
CATERPILLAR AND DEERE HAVE A STRONG DAY...With technology stocks underperforming for the second day in a row, money flowed into cheaper parts of the market today. All eleven sectors closed higher with energy, materials, industrials and healthcare in the lead. Energy is benefiting from crude oil prices over $40, while metal stocks like copper and gold are leading materials higher. Commercial vehicles and trucks helped make industrials the day's third strongest sector. Two of the day's best performers in that XLI group are shown below. Chart 1 shows Caterpillar (CAT) rising to the highest level in a month. Chart 2 shows Deere (DE) doing the same. Both of their relative strength ratios (upper boxes) are rising as well. Chart 3 shows the Industrial SPDR (XLI) trying to stabilize at its 50-day moving average and a rising trendline drawn under its March/May lows. Its relative strength ratio (solid line) is also bouncing for the first time in a month (see circle). Healthcare had another strong day.
MORE HEALTHCARE LEADERS...Yesterday's message showed the Health Care SPDR (XLV) moving toward its highs for the year and starting to show better relative strength. That can be seen from the rising XLV/SPX ratio which is the solid line in Chart 3 overlaid on the price bars of the XLV. The daily bars in Chart 3 also show the XLV pulling closer to its June high. Yesterday's message showed three healthcare leaders that included Lab Corp of America (LH), Quest Diagnostics (DGX), and Perkinelmer (which hit a new record). All three were up again today. Here are two more. Chart 5 shows Align Technology (ALGN) which is moving up to challenge its January high at 301. Chart 6 shows UnitedHealth Group (UNH) moving up to challenge its June high which represented a new record.
STOCKS CLOSE STRONG... A late rally helped stocks end the day on a strong note and regain most of yesterday afternoon's late losses. Chart 7 shows the S&P 500 gaining 42 points (1.3%) but still trading below its early June intra-day peak at 3233. It needs to clear that chart barrier to move above its current trading range. Chart 8 shows the Dow Industrials rising 556 points (2.1%) and closing above its 200-day average for the first time in more than a month. But it remains below its June peak at 27,600. The tech-heavy Nasdaq Composite managed to close nearly 1% higher but was the weakest of the three. That appears to reflect some profit-taking in high-flying technology growth stocks, and some rotation into weaker parts of the market that offer better value. That could be a healthy sign for the market if those weaker cyclical sectors can continue to make up for any potential softness in the tech sector.
