Big tech earnings next week.

The staples sector had a particularly rough week.  The XLP(SPDRs Select Sector Consumer Staples ETF)finished the week at new 2018 lows.  This was also the second weekly close below the 2017 lows in the last five weeks.  Quite a reversal for and index that in late January was trading at new all time highs.

This rather ugly action has driven the ratio of Consumer Staples to the S&P 500 Index to its lowest level since May 2008:

A number of staples completely collapsed over the last three days.  Pepsi(-6%), Colgate-Palmolive(-6.6%), Procter & Gamble(-5.5%), Phillip Morris(-11%), and Clorox(-9.6%). 

Would expect some dip buyers to step up next week. 

Hat tip Charlie Bilello

There has been quite a bit of chatter lately warning about an impending recession.  The subject always gets a lot of attention from investors.  It may be a bit early to be expecting one.  Here’s a couple of charts from LPL Research that throw a bit of water on the potential of a recession anytime soon.

Some color from Ryan Detrick:  Earlier this week these A/D lines all closed at new all-time highs:

S&P Small Cap A/D line

S&P Mid Cap A/D line NYSE Common Stock Only

A/D/ line OEX A/D line

S&P 500 A/D line

Remember, breadth leads price and this is a great sign

Some color on the LEI reading:   The Leading Economic Index (LEI) is one of our favorite indicators. Yesterday it came in at +6.2% YoY, well above the warning sign of negative YoY that has proceeded every recession since early ’70s. Another clue an economic slowdown is a long way away.

Hat tip Ryan Detrick/LPLResearch

Wells Fargo never really recovered after its massive breakdown back on February 5th.  The stock fell over 9% that day on its heaviest downside volume since April 2011.  This news inspired flush did a tremendous amount of damage before the 200 day moving average provided a bit of support.  WFC managed a sharp bounce in mid February but by the end of the month a fresh down leg was underway.  The 200 day held in early March once again but finally gave way in mid March.  Two weeks later the stock had stretched the sell off from the January highs to a 24% loss. 

In late March WFC began to firm up near a major support zone.  This key area($51.00-$50.00) marked multi-month lows in 2017.  In addition Wells had entered deeply oversold territory.  This week (https://twitter.com/GarySMorrow/status/987025263622959104), WFC has successfully retested this zone and now appears poised for a healthy rebound. 

Trading notes:  WFC has a very solid support area in place from the $52.00 to $51.00 area.  We would be a buyer on weakness.  A close back below $50.00 would clearly violate the multi week April lows sending a clear warning sign in the process.  On the upside, a logical initial target is the $56.00 area(200D moving average).

At time of publication we are long WFC in some managed accounts.

CRB Commodity Index outperforming S&P 500 by 3.9% over past 10 months, strongest relative gains since 2011.

Hat tip Charlie Bilello

Monthly chart of Silver.  Tight range between 15 and 20.  Looks good for the Bulls.

Been a helluva run of late.  Closed above 2014 highs today.  Impressive.

What is the Industrial Metals Index?   Formerly known as Dow Jones-UBS Industrial Metals Subindex (DJUBSIN), the index is composed of futures contracts on aluminum, copper, nickel and zinc. It reflects the return of underlyying commodity futures price movements only. It is quoted in USD.

Hat tip The Daily Shot

After last week’s powerful breakout the USO index consolidated just above major support.  Today USO is surging over 3.2% on accelerating trade and will finish the session at new 2018 highs.   The index is far from overbought and is set up well for more upside.  The energy sector is moving right along with crude.  SLB(Schlumberger) and CVX(Chevron)are among the top gainers, both up over 3%.  Impressive. 

At time of publication we are long SLB and CVX in some managed accounts.

Quite a milestone.  US 6-Month Treasury Bill yield reached a 9 year high, closing above 2% for the first time since August 2008.

Hat tip Charlie Bilello