Friday, June 12, 2009

Pre-Opening Briefing: A Glance at Three Sectors

We tried for new highs in the S&P 500 Index yesterday before falling back into the multi-day trading range. Three sectors that had led the rally from March through early May have not been looking strong lately in the wake of rising short and long term interest rates: banks ($BKX; second from top) and homebuilders (XHB; second chart from bottom). Meanwhile, consumer discretionary stocks (XLY; bottom chart) are acting toppy, not least because of rising fuel prices as well as those higher interest rates. In a strong economic recovery, we should be seeing vigorous relative strength among these sectors; that's not been happening over the past month.

8:13 AM CT - Note that we're trading in the middle of a multi-day range, with sellers dominating in the overnight market on the heels of a strong U.S. dollar and lower commodity prices. I'm watching closely to see if we can stay below yesterday's lows and the overnight highs to make a run for the multi-day lows vs. trade within yesterday's range (and make a run for the Thursday pivot).