After struggling to overcome the 1,850 area since early January, the S&P 500 made a good run at it once again on Monday.
On an intraday basis, the index managed to climb as high as 1,858, but in the afternoon trading session most of the intraday gains for the S&P 500 and its related ETF, the SPDR S&P 500 ETF (SPY), evaporated again. This left the index once more failing to overcome resistance, with a closing stamp at 1,848.25.
On the close-up time-frame of the below 120-minute chart, we can clearly see the failed breakout past resistance from Monday. The late-day selling, however, wasn’t strong enough to cause any real technical damage and in fact might have been more driven by algorithms battling each other.
On the daily chart, it’s both understandable and healthy that after the steep V-shaped turnaround in January/February, the S&P 500 would need to spend some time digesting this move. Through this lens, the past five or so trading sessions that the index has spent consolidating below the 1,850 area now stands a very good chance of leading to a push past this resistance area sooner rather than later.
For reference purposes, on the daily chart of the SPY, the resistance area that needs to be overcome for the ETF to release higher is $185. If and when the SPY accomplishes this, it could in coming months lead to a move toward the area between $192 and $197.
First better support in this time frame is at the yellow 50-day simple moving average, currently at the $181.50 mark.
Because this market is now once again powered by momentum, it is imperative that one keeps a close eye on the various sectors and groups for relative strength and relative weakness.
Sectors with relative strength should be bought, while those flagging relative weakness for the most part are better avoided.
Sectors like energy, healthcare and technology continue to show relative strength, which leads me to look for single-name stocks to buy/trade in those areas. Energy stocks were the top performers on Monday, and this led me to find a few interesting candidates in this space.
Not all energy stocks are created equal, of course, but oil company Hess (HES) looks to be intact to break past its October downtrend line (black) and work its way toward the high $80s in coming months.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.