S&P 500 Rally Can Continue on Momentum, Breadth: RBC’s SluymerBy Andrew Cinko
(Bloomberg) — S&P 500 range bound for months, yet monthly momentum using MACD indicator is still positive, advance/decline line continues to climb, and percentage of index members with positive weekly momentum continues to rebound; together that’s signaling more gains for stocks in 2Q:
- S&P 500’s 50-DMA (at 2084) remains first support
- Sees laggards continuing to gain, leaders faltering as part of S-T tactical shift; longer term trends will eventually reassert themselves
- Among laggards, recommends buying: C, SIVB, KEY, AMGN, ABBV, DAL, CSCO, CIEN, APC, HP, PTEN
The laggard part is what I find interesting… as just this month we have seen some left for dead stocks pick themselves up off the mat, DDD, SSYS, YELP, P, MBLY and Chinese Internet stocks. The only thing I would add here is to be careful chasing stocks like these after sharp bounces off a 52 week and multi-year lows:
The reversal yesterday in SSYS, after opening at new one month highs, after 20% gains off the 52 week lows, the stock reversed the gains and closed on the dead lows of the day, down 7.5% from the early highs:
As for the breakout part, I suspect you stick with what got you here. But it is important to note that the sector rotations we are see is likely the culprit for the churning nature of the S&P 500 between 2050 and 2100 for the better part of the last two months:
This is obviously a well defined trading range, and playing for the breakout at 2100 has not been a profitable strategy, your best shot is to buy between 2000 and 2040 and then make your decision at 2100.
Yeah the SPX looks great, and is likely to breakout at some point in the near future, but a dash for trash like the stocks listed above should not be the reason for it, it should be money rotating into under-performing sectors like Banks after a week that displayed better than expected results from most that reported.
This chart is pretty self explanatory: