CHIP STOCKS LEAD MARKET HIGHER -- SPX STILL LAGS BEHIND -- AUTOS HAVE A STRONG WEEK

TALE OF TWO MARKETS... Previous messages have pointed out the growing gap between rising technology stocks and the rest of the market.   That gap widened even further this week.   Technology was once again the week's strongest sector thanks to surging chip stocks.   The weekly bars in Chart 1 show the VanEck Vectors Semiconductor ETF (SMH) surging 10% this week to the highest level in more than a year to lead the technology sector higher.  Chip stocks were led higher by a 24% jump in NVIDIA to a record high.  One cautionary note is that the 14-week RSI line for the SMH in the upper box has entered overbought territory over 70.   Once again, however, gains in the rest of the market were less impressive.

S&P 500 LAGS BEHIND... The weekly bars in Chart 2 show the S&P 500 testing overhead resistance near 4200.  A close above that level could signal a further gain to its August high (red line).   Its moving averages remain in positive alignment.   The SPX, however, shows a relatively minor gain for the week and continues to be held back by lack of upside participation.   For example, eight of its sectors ended the week in the red.   In addition, only 35% of its component stocks are trading above their 50-day moving averages; with 42% above their 200-day lines.   That means that the majority of its stocks are still in downtrends.   The S&P Equal Weighted Index actually declined this week which widened the gap between it and the S&P 500 Large Cap Index.   That may not be enough to prevent further gains in the SPX, especially if technology stocks keep rising.   But it does suggest that narrow participation could limit the size of further gains.

AUTOS LEAD XLY HIGHER... Consumer Discretionary stocks were one of the three sectors gaining ground this week.      The daily bars in Chart 3 show the XLY nearing the highest level in three months.   It's being led higher by auto stocks.   Chart 4 show Ford (F) ending the week on a very strong note and testing its 200-day average.   Chart 5 shows Tesla (TSLA) climbing to the highest level in two months and nearing its 200-day line as well.   The Consumer Discretionary SPDR is the only sector outside of technology and communications that has gained ground year-to-date.