While the headlines remain scary to some, those who view the markets through technical analysis continue to see many positive developments for stocks.
Scott Redler, a partner with T3Live.com, believes that with the S&P 500 closing above it’s 200-day Moving Average, this has now opened the door for the index to reach the 2800 level. He also goes on to mention that S&P Advance/Decline line is “really strong.” Hard to argue with his sentiment, as we just set new highs in this index. Further. according to Scott, “the active bulls keep stepping up where they have to.” Things that need to happen in order for the rally to stay underway are indeed happening.Todd Sohn, a technical analyst with Strategas, believes that as more time goes by, it becomes less and less likely that the broad indices will retest their respective December lows. “You could get a pull back to 2,550 to 2,600, and that may be all you need.”Todd mentions that one of the most important areas to keep an eye on are Semiconductors, and specifically the Philadelphia Semiconductor Index, or SOX. Before we saw the dramatic sell off in indices in Q4 2018, Semiconductors had already begun to show weakness. “You’re seeing all these economically sensitive sectors working — industrials, semiconductors and home builders.” JP Morgan technical strategist Jason Hunter agrees with this outlook, in that the SOX is a big key to the market remaining in a healthy uptrend. According to Fundstrat’s Robert Sluymer, there are also many bullish signs outside of the US. He specifically points out to the recent reversal in the Shanghai Composite (SSE). Why is this important? Because these stocks led the move down in foreign equities. Thus, their strength should lead the move higher.Robert also brings to our attention that it’s a positive to see Growth stocks outpace Value-oriented areas here in the US. He notes that in the Mid-Cap space, the relative strength of Growth to Value continues to make new highs.But what are interest rates saying about the possibilities in equity markets? For many technical analysts, this area is just as important as tracking what stocks are doing. Todd Sohn says he thinks the Federal Reserve’s “dovish” tone in December was clearly a positive for stocks. Hunter thinks that the 10-year Treasury rate will hold above 2.5-2.6% and eventually trade back to the 3.0% area. These three professional technical analysts continue to see very constructive developments across many important, highly-watched areas of the market…
- The S&P 500 is holding above its 200-day Moving Average
- The Advance/Decline Line has made new all-time highs
- Economically sensitive areas like Semiconductors, Industrials, and Homebuilders are moving through key resistance levels
- Global equities, led by the Shanghai Composite, have reversed are trending higher
- Growth stocks continue to outperform Value stocks
- Interest rates are below their highs and the Fed is signaling an accommodative approach in regards to interest rates
From a “weight of the evidence” approach, things are looking good in 2019!