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Dear EarningsBeats Member:
We've got a new trading month getting underway with earnings season getting ready to kick off in the next two weeks. The overall expectations are mixed with traders wondering what impact the tariffs and lower interest rates might have had on the bottom line of Corporate America. We'll be following all of the developments and keeping everyone posted. In the meantime, mark your calendars for next Monday, July 8 when we'l be joined by StockCharts.com Senior Technical Analyst Tom Bowley when well have our "Market Outlook - 2nd Half 2019" Webinar. You won't want to miss this one!
Identifying Shifts in Relative Strength
While it's important to stick with industry groups that are leading the benchmark S&P 500, we need to be aware of changes taking place in relative strength throughout the market. One such change appears to be unfolding in the Dow Jones U.S. Toys Index ($DJUSTY). This group was battered in the second half of 2018 and really hadn't begun to recover....until Friday. Here's the chart:
Not only do we see an absolute breakout above the 850 level, but the DJUSTY:$SPX relative ratio just crossed above its 20 week EMA. That's not a "jump all in with both feet" signal, but a group cannot get healthy until that cross occurs. It's definitely a step in the right direction. The first test will be to see whether the DJUSTY can hold above its breakout level and if relative strength continues to build.
Happy trading!
Tom Bowley
Sr. Technical Analyst
StockCharts.com
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