US equities closed lower, though off their worst levels, in Friday trading. The major market indices finished the week lower (breaking five-week gain streaks for S&P and Nasdaq). Treasuries were weaker with the curve steepening notably. The dollar was slightly better vs the euro and the yen. Gold finished down 0.2%. WTI crude settled down 3.9%, just off the worst levels and closed back below $40/barrel.
- Outperformers: Financials +0.77%, Industrials +0.21%, Materials +0.13%, Consumer Spls. (0.24%), Energy (0.33%), REITs (0.46%), Utilities (0.56%), Healthcare (0.73%)
- Underperformers: Communication Svcs. (1.92%), Consumer Disc. (1.41%), Tech (1.34%)
S&P futures are down 0.8%, near their worst levels. Asian equities traded higher overnight with Australia a standout, followed by Japan, South Korea, China and Taiwan. European markets weakened after seeing strong gains on Monday. Treasuries are firmer with the curve flattening. The dollar is slightly better vs yen and euro. Gold is off 0.2%. WTI crude is down 3.5% amid concerns about Saudi Arabia cutting pricing for October sales.
The Q’s: Working Off an Extended Position
The Invesco QQQ Trust (QQQ) bore the brunt of the selling pressure last week but remains with a Very Bullish Chaikin Power Gauge ETF Rating. The OB / OS Indicator has room to an oversold position and Chaikin Money Flow is bullish. The fund is above the rising long-term trend line which now marks the bottom of the key support zone between $260 and $270. We look for QQQ to hold this level when nearing an overbought position before becoming more aggressive in the near-term.
A Closer Look at Sector Rotation
The Communication Services Sector (XLC) Relative to the S&P 500
The S&P 500 Communication Services sector relative to the S&P 500 continues to trade above the rising 200-day moving average but has fallen back into the consolidation zone. The RSI is in bullish ranges, confirming the price trend. Trend: Bullish