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Sizing Up the S&P 500

  • Index forming potential ascending channel since mid-January.
  • Making higher lows above previous peak from 2022
  • Wilder’s Relative Strength Index (RSI) reflects strong uptrend
  • Intermarket: 10-year yield near top of recent range near 4.25%. Potential downside with yield curve near top of range since summer of 2022.
S&P 500, daily chart, with key patterns and indicators.

Key News

  • Chips in focus:
    • Citi raises 2024 revenue estimates after SIA reports December sales +1.5%
  • Online advertising market recovering: Insider Intelligence
  • January ISM services beats as orders, prices accelerate
  • China tightens controls of margin debt, short selling to support market
    • China crisis may be triple win for S&P 500: deflationary pressures and capital flight to U.S. without supply-chain disruption
  • Factset: Analysts cutting Q1 estimates by 1.4% versus 2.1% average
  • Hartnett of BofA: Sentiment similar to 1999 but so far not at “contrarian sell”

Sector Watch

  • Semiconductors, transports, consumer discretionaries leading
  • Airlines, industrials outperforming
  • Banks, gold minders, energy lagging

Healthcare in Focus

  • S&P Health Care Select Sector Index hits new highs this week, but remains at bottom of historical ratio vs S&P 500
  • Year-over-year healthcare jobs growing 4.2% vs 2% before 2020
  • Humana (HUM), CVS Health (CVS) recently warned of rising healthcare utilization
  • Device maker movers: ISRG, BSX, ALGN, EW, GEHC
    • Next reports: ZBH (this morning), MDT (2/20 premarket)
Health Care Payrolls, year-over-year % change.

Movers of the Week: Petrobras & Pure Storage

  • Petrobras: Brazilian oil & gas driller trades for 4x earnings
    • Prices challenging 9-year resistance around $18
    • PBR +27% in last 6 months vs -6% for broader energy sector
  • Pure Storage: Flash-memory maker pivoting to subscription services
    • Fell on weak guidance 11/30, but rebounded on hopes of higher margins as customers migrate to subscription services
    • Consolidating near record highs before earnings in late February, early March
    • PSTG +40% in last year

Upcoming Events

  • Earnings this afternoon: PINS, AFRM,
  • Fri 2/8: PEP earnings
  • Tue 2/13: CPI
    • Earnings: KO, SHOP, ABNB
  • Wed 2/14: CSCO earnings
  • Thu 2/15: Retail sales, initial jobless claims
    • Earnings (premarket): DE

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.