STOCKS SHOW MODEST GAINS ON THE WEEK -- SECTOR BREADTH REMAINS WEAK -- COMMODITIES TEST SUPPORT LINES
MAJOR STOCK INDEXES GAIN ON THE WEEK... Stocks saw modest gains on the week but not enough to disturb their major downtrend. Chart 1 shows the Dow Industrials gaining .77% for the week but remaining well below overhead resistance levels and moving average lines. Chart 2 shows the S&P 500 gaining 1.9% but still trading well below its 50-day moving average. The Nasdaq market led the weekly rebound with a gain of 4.5%. Chart 3 shows the Invesco QQQ Trust moving up to its 50-day line. What was noticeably missing for the week was trading volume. All three charts show volume declining for the week which suggests the absence of strong buying pressure. Most sectors also lost ground.
NARROW SECTOR PARTICIPATION... The three top sectors for the week were consumer discretionary, technology, and communication services. All three, however, remain in downtrends. Two other sectors that saw modest gains were healthcare and financials. The other six sectors lost ground with the weakest performers in utilities, energy, and materials. Relative weakness in energy and materials reflects the recent downturn in commodity prices.
COMMODITY PRICES TEST SUPPORT... Commodity prices have lost ground over the last month which suggests that raw material inflation may be starting to weaken. Chart 4 shows the S&P GSCI Commodity Index falling to the lowest level in four months, but trying to find support at its 200-day moving average. That's an important test of the commodity uptrend. The price of oil plays a big role in the GNX. The daily bars in Chart 5 show WTIC Light Crude Oil testing support along its spring lows and its 200-day moving average. That's another important test. Stocks tied to commodities have also started to lag behind the rest of the stock market. Commodity selling could also be an early sign that the U.S. economy is heading into recession. That negative signal would become more serious if their support lines are broken.
