Further reinforcing the view that that recent pullback was bullish, the Elder impulse chart never went red, and has now gone green again, flashing a new buy signal. While the SPX has not broken past last week's high, it probably will, and the most conservative target I come up with after that is about 1379. Today's volume puts the clincher on it as the buyers finally had enough of the pullback and decided things had gone low enough.
The Nasdaq did break out and is now on target, conservatively, for about 2920. The price relative line continues it's nearly straight up move: as long as that continues it is just about impossible not to be bullish.
To add insult to injury to the bears, the Russell 2000 also broke out, and also has a rising price relative line. The double whammy of the Nasdaq and Russell should be enough to keep the shorts scrambling, which will just make things rise faster. There is a time to be bearish: this ain't it.
| Ticker | Relative Strength Index (14) |
| XLB | 74.12 |
| XLK | 72.79 |
| XLV | 70.14 |
| XLI | 68.25 |
| XLY | 68.05 |
| XLF | 67.23 |
| XLP | 52.7 |
| XLE | 52.22 |
| XLU | 48.41 |
Here are the sectors ranked by RSI. I am surprised to see XLB in first place, but we did look at the dollar index yesterday, so that shouldn't be a surprise. We had very high overbought RSI on the leading sectors last week, and it does seem most of them came down a little bit.
When you see the leading sector with an RSI over 70, it's not a bad bet that it won;t be leading next week. On the chart, XLB has been flashing blue bars for almost a month, indicating it's up trend is severely slowing down, and a trend change could be imminent. I suspect we will see some of that here.
XLU is still in last place, but appears to be leveling out here and finding a bottom. Unfortunately, it is still under performing the market, and is highly unlikely to outperform it any time in the near future. We could be seeing some rotation into here, but probably not much, especially if the rest of the market starts moving up again.
I have been saying for the last few months that the Fed has lost relevance in the market, but it is becoming clear they still have the power to levitate markets. For how long is another matter, on that I won;t hazard a guess on.
I will have the new highs update shortly.
