Stocks Rally Ahead of a New Stimulus Package in the US and Key Earnings Reports on Thursday - Chaikin Analytics

Stocks Rally Ahead of a New Stimulus Package in the US and Key Earnings Reports on Thursday

Major US equity indexes finished higher on Monday Growth and momentum factors outperformed after lagging last week. Technology and Materials were the best performing sectors while Utilities and Financials lagged. Treasuries were weaker with the curve steepening. The dollar was lower on the major crosses. Gold finished up 1.8% at a new all-time high. WTI Crude finished up 0.8%, reversing earlier declines.

  • Outperformers: Tech +1.61%, Materials +1.41%, REITs +1.17%, Consumer Disc. +0.87%, Communication Svcs. +0.78%
  • Underperformers: Utilities (1.26%), Financials (0.81%), Energy +0.21%, Industrials +0.39%, Consumer Spls. +0.54%, Healthcare +0.72%

S&P futures are down 0.2% after Asian equities were mixed overnight. European equities are mostly lower, reversing earlier gains. Treasuries are unchanged to slightly weaker. The dollar is stronger vs the euro but lagging the yen. Gold is down 0.5% after trading at a record high yesterday. WTI Crude is off 0.3%.

A Pause For Precious Metals is in Order

The rally in precious metals has been sharp and fast and likely needs a pause in the near-term. The Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR) is at a new 52-week and is extended above the rising long-term trend line and the upper volatility band. The fund is also overbought based on our indicator. While we remain bullish from a trend perspective, we are not inclined to chase strength in the group at current levels. 

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 and is consolidating above the breakout level. The RSI remains in bullish ranges, keeping momentum to the upside for now. On Thursday we will hear earnings reports from FB, GOOGL and EA which are important names in the group. Trend: Bullish

S&P 500 Consumer Discretionary Sector (XLY) Relative to the S&P 500 

The Consumer Discretionary sector remains above the 200-day moving average and is trading at two-year highs on a relative basis. The RSI is in bullish ranges but we note that a slight bearish divergence remains in place. AMZN is a large weight in this group and we strongly suggest taking analysis to the industry level when identifying bullish and bearish opportunities. AMZN reports their earnings on Thursday. Trend: Bullish

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