The market made new highs this month, with utilities, technology and consumer staples being the three top sectors. Traditionally, utilities and consumer staples are considered risk-off sectors, and technology is thought of as risk-on sector. The broad market, at the Russell 1000 universe, now has a downward tilt to its multi-period breadth. Thus, we have a mixed message from the market this month. The S&P 500 hourly chart tells the story well. The market drifted to new highs in a cup-with-handle formation. Then we had a sharp break, suggesting the handle was broken. However, the handle was quickly glued-back it seems as the market rallied off trend-line support into new highs. Finally, the market backed off a bit, in a potential re-test of the breakout point. If nothing else, the market defined support and resistance clearly this month.
Chart 1: The SPX hourly chart illustrates the market's action in May very well. The sudden break mid-month found support at the uptrend line and led to a rapid reversal to new highs.
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