Markets gave up decent early morning gains basically around late morning and flatlined thereafter with the S&P 500 UNCH and the Nasdaq up .1%. The Nasdaq had been higher by almost three quarters of 1% early on. The S&P 500 continues to tread water above its 50 day SMA and still hovering below its ascending triangle formation with the top horizontal line at 2120. The Nasdaq looks a bit more ominous with the bearish engulfing candle on 4/27 right near all times highs, that were recorded 15 years ago. We still feel like this could be potentially a very spread out double top. Sectors that keep us awake at night are the transports and utilities. Sure the latter is defensive and they will eventually have to compete with the higher interest rates, with heavy emphasis on the word eventually. The group can be discounting that presently, but interest rates rising is interpreted as a stronger economy. The XLU since the week ending 1/30 has been lower 9 of the last 15 weeks and volume trends are bearish. That streak started with an 8.5% drop in firm volume the 3 weeks between 1/30-2/13. Might not sound like a lot but thats a heady loss for that sector. The transportation group is a bit more concerning. Names like NSC down 17%, UNP 18% and KSU by almost a quarter. Their participation in a thriving economy is essential. Perhaps one can be an optimist and say that the market holding up well with such a significant group wavering is a good sign. The pessimist is a bit more confident watching the sinking ship take on more water each day. Will its weight break the backbone of the benchmarks?
This article requires a Chartsmarter membership. Please click here to join.