Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Stocks have rallied since Friday, largely due to some promising developments out of Europe toward addressing their sovereign debt issues and shaky banks. As I said last week, global investors hoped for a sign of commitment from EU leaders at their latest summit to stimulate growth, create a banking union, and debt mutualization (e.g., Eurobonds). What they got was pretty close. And U.S. investors were cheered to see a healthy rally into our Independence Day holiday.
In fact, Germany’s shift away from its hard-line austerity position may have a market impact much like the Fed’s quantitative easing and the Troubled Asset Relief Program (TARP) of 2008. Spain’s 10-year bond yield has fallen back down below 6.5%, as creditors breathe a sigh of relief.
Also, you undoubtedly heard that the Supreme Court upheld the constitutionality of Obamacare, and the initial knee-jerk market reaction last Thursday was negative. But the market quickly reversed, and it has been strong ever since. The iShares Dow Jones U.S. Healthcare Sector ETF (IYH) hit a new 52-week high on Tuesday.
As the market closed out Q2, we see that it had some tough going in the wake of its big Q1. Stocks in the S&P 500 surged 12% during Q1, which was one of its strongest quarters in history. The SPY hit a high of 142.41 on April 2 before the Q2 correction kicked in. The iShares Dow Jones U.S. Energy Sector ETF (IYE) was a particularly weak-performing sector during Q2, and in fact the IYE now finds itself at the bottom of Sabrient’s SectorCast ETF rankings of the 10 U.S. sector iShares. Not surprisingly, defensive-oriented Utilities (IDU) was the top performer for Q2.
Looking at the SPY chart, it is made quite a bullish move, as I suggested might happen with its developing bullish ascending triangle pattern. SPY closed Tuesday at 137.4 and now it finds itself at its upper Bollinger Band and breaking out of the sideways channel and ascending triangle and above its 100-day simple moving average. RSI, MACD, and Slow Stochastic all look quite bullish.
The VIX (CBOE Market Volatility Index–a.k.a. “fear gauge”) closed Tuesday at 16.66. After a couple of tests of resistance at 20, it has fallen hard in conjunction with the market rally and confirms the bullishness in stocks.
Latest rankings: The table ranks each…
