US equities were higher on Wednesday, closing near the best levels of the day. All sectors were higher, led by Health Care. Consumer Discretionary and Financials lagged. Treasuries were mixed with the curve steepening. The dollar was stronger vs the euro and the yen. Gold ended down 0.1%. WTI crude settled down 0.8%.
Last week we began to highlight key retracement levels to provide a sense of where the market could begin to bottom. Friday’s low was at the 50% retracement of the December 2018 – February 2020 advance. Today we perform the same exercise to determine where an interim rally may find resistance. Using the the February 19th high and last Friday’s low, we can see that SPY has reached the 50% retracement level. The 61.8% retracement level is at 318.62.
S&P futures are down 1.9% in early trade. Asian markets rallied overnight with China, Hong Kong, Japan, Australia and South Korea all up over 1%. European markets are under pressure. Treasuries are stronger. The dollar is weaker on the major crosses. Gold is up 0.2%. WTI crude is up 0.1%.
Looking at Market Breadth
S&P 500 Breadth
The Advance / Decline Line for the S&P 500 continues to track the movement of the index and has undercut the January low, confirming the recent weakness in price for the index. The line is now testing the low from last Friday despite the S&P 500 closing above its closing low from last week.
Stock of the Day – Select Medical (SEM) – Very Bullish Rating
Select Medical Holdings (SEM) has a Very Bullish Chaikin Power Gauge Rating and has been leading the SPY since last July. The stock is oversold based on our indicator and Chaikin Money Flow is bullish. SEM is above the rising long-term trend line and has price-based support in the $22 to $23 range. Above $22.50, the stock is likely to move higher.
The Chaikin Power Gauge Rating for SEM is Very Bullish due to very strong earnings performance, very strong price/volume activity, attractive financial metrics and positive expert activity. SEM’s earnings performance is very strong as a result of high earnings growth over the past 3-5 years and consistent earnings over the past 5 years.