Why are Large Cap Leaders leading?
While the major indices still try to sort out the next interest rate direction, soft, hard or no landing, and/or if inflation has peaked, a few stocks have dominated. Companies like Steel Dynamics (both holdings in the quant model) are in the manufacturing and infrastructure sectors.
“Existing programs sponsored by the industry and government, such as Partnership for a New Generation of Vehicles, Aerospace Industry Association, USFEAST or AMTEX, or an industry-sponsored program such as the National Electronic Manufacturing Initiative, fall into the framework categories of advanced manufacturing systems and advanced manufacturing processes and equipment.” — National Academic Press
In the current environment, manufacturers are reliant on infrastructure for receiving and then delivering raw materials in a timely fashion. Furthermore, the scarcer the supply of raw materials, the more expensive it is for manufacturers and consumers. To date, stocks GE and STLD have rallied and withstood rising costs.
The beauty of quants is they do the math without judgement.
Steel Dynamics (STLD) may be on the verge of another breakout after a month of price consolidation.
STLD, according to our Triple Play, outperforms the benchmark. And the real motion momentum indicator shows momentum improving but not yet wowing. Wednesday’s close was the all-time highest close in STLD. With indices red to flat, that is incredible. This and Century Aluminum (CENX) featured earlier this week, are proof that commodities are still not only a thing — but THE thing.
And don’t forget to read the Daily we published over the weekend on Energy and Oil prices. That sector could be next!
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- S&P 500 (SPY): 390 support with 405 closest resistance.
- Russell 2000 (IWM): MA support around 184. 190 has to clear.
- Dow (DIA): 326 support, 335 resistance.
- Nasdaq (QQQ): 300 the pivotal area, 290 major support, 284 big support, 300 resistance.
- Regional banks (KRE): 65.00 resistance, 61 support.
- Semiconductors (SMH): 228 support, 240 pivotal, 248 key resistance; 248 resistance 237 then 229 support.
- Transportation (IYT): 235 resistance as best Mod Fam performer and 228 support.
- Biotechnology (IBB): 125-130 new range.
- Retail (XRT): Weak sector now–here comes more signs of stagflation.
Director of Trading Research and Education
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.