Morning Notes — Not There Yet

Yesterday’s record high close in the SPX was by the thinnest of margins and more strength is required to clear technical resistance.  If the SPX manages to clear technical resistance, the rule of thumb on new highs usually assigns ~10% upside.  While yesterday’s ‘record high close’ fell short of a breakout, today’s value/cyclical leadership adds some encouragement for it to happen.

Cyclical/value: Back in late July, our case for short-term cyclical/value outperformance was based on an eventual infection peak in Southern and Western hotspots. We saw two prior periods of cyclical/vale outperformance following peaks in the Northeast and later in Midwest/Mid-Atlantic region.  But with the passage of time, it now looks like infection rates for the entire US peaked in late July.  And if this trend holds (please keep an open mind), we may see states resume their reopening process, which would be a tailwind for continued cyclical/value sector outperformance.