For technicians the only thing better than a big early loss reversing into a sizable gain by the CLOSE, is what transpired Monday. A big early gain refusing to relinquish anything at all and remaining firm. Sure it was the lagging Dow that shined higher by 1.3%, but the Nasdaq registered its third very respectable advance higher by .9%. Volume could cooperate more, but it could deliver this week, as nonbelievers become converts.
Other areas of the market that contributed greatly to todays rally were the oil services and transports. Of course strength in these groups speak to the economic strength that we have been noticing. The OIH came into today with the last three weeks CLOSING very taut all within just .11 of each other and moves, in either direction, could be powerful once the breakaway happens. Look for follow through to continue. The IYT rose 2% Monday and this industry is patrolled carefully as Dow Theorists monitor for any signs of a breakdown, which for the moment look bleak.
The financials received a much needed boost as the financials as the XLF was the best performer among the major S&P sectors rising 2.3%. The ETF remains within a bullish falling wedge and many big banks will report this week. Many say that the market can not rally without this group, proven false lately, but imagine if this space can accelerate as it could have a profound effect on the overall markets.
The only two sectors that fell today were just what bulls wanted to witness. The staples and utilities fell with the XLP and XLU slipping .4 and 3.1%. Obviously the latter is a bond proxy and often trades in an inverse fashion to the financials, but the outsized loss Monday was alarming. The ETF did come into this week advancing 13 of the last 14 sessions, but volume Monday was anything but quiet. Perhaps this is a vote that the financials will overachieve during earnings reports this week.
With all the hoopla surrounding SBUX with plastic straws (what about eliminating their much bigger cups while they are at it), one could have prospered with DNKN. SBUX even after todays lukewarm lift is still near bear market mode as it trades 19% off most recent 52 week highs. It is still dealing with the 15% slump the weeks ending between 6/22-29 with the week ending 6/22 being accompanied by the largest weekly volume in the last 5 years. On the other hand DNKN sits right at all time highs, and its dividend yield is comparable at 2% compared to DNKN’s 2.9%. Like SBUX that is grappling with the very round 50 number, DNKN recorded its second consecutive CLOSE above the 70 figure. The 70 number aligned with a bull flag breakout which carries a measured move to 76. It is easy to spot the difference in jolt in these two coffee plays.