Utilities drive outperformance, while Semis wane

Markets have stabilized ahead of the long holiday weekend, and a near-term bounce up to 3830-3860 looks to be happening to kick off Q3 on a good note.   Near-term, active traders should look to sell into this bounce next week, expecting that 3946 should not be exceeded before prices roll over to test and take out 3636.  Sector-wise, this past week has been marked by steady outperformance by the Defensive groups, while Automobiles, Metals and Mining, Internet retailers, and Semiconductors have been very hard hit.  In general, this month looks to be a pivotal one for US Equity markets and should also coincide with lows in Treasuries and Cryptocurrencies.  However, at present, until technical structure improves and/or signs of capitulation on a move to new monthly lows happens, it’s right to continue to be selective and favor defensive groups.   Bottom line, one should avoid trying to buy dips aggressively until ample evidence of stabilization happens and/or signs of downside exhaustion appear.  SPX should likely bottom out just below 3600, with 3505 being very strong 50% range support.

Performance has largely been defensive this past week

When doing a quick scan on the SPX GICS Level 3 sub-sectors over the past week, we continue to see strong performance out of the defensive groups like Utilities and Staples.  Insurance stocks have fared the best lately within Financials and substantial outperformers over many Money Center Banks.  Meanwhile, Aerospace and Defense has made a comeback after a couple failed breakouts.  Yet this group has held up relatively much better than others within the Industrials complex.

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