July 23, 2020
The S&P 500 pushed through technical resistance on Monday, which makes the old cycle high of ~3225 new short-term support. Longer-term technical support exists in the 3090-3120 zone. The technical push through consolidation levels helps make the case for further near-term gains, but today’s uptick in weekly jobless claims will make it harder. Markets may need to see the $1T fiscal stimulus bill trend higher or see incremental positive vaccine headlines before pushing broadly higher in the near-term. Those developments may bring cyclical/value sector leadership, which broadens out participation and tends to make rallies more substantial and sustainable. I expect eventual cyclical/value sector leadership based on slowing case growth in current hotspots. Over the last ~2 weeks, we’ve noted decelerating COVID-related hospitalization trends in AZ and TX, and expect the narrative around this latest wave of infections to shift as early as next week. And yesterday’s HCA Healthcare (HCA) earnings call included a mention that COVID hospitalizations in Texas have peaked and declining with Florida a week behind. Cyclical/value leadership followed a case count peak in the Northeast (late March/early April) and the Midwest/Mid-Atlantic regions (late May) with decelerating COVID-related hospitalizations leading by ~2 weeks.