May’s employment report was kind of like a Goldilocks’ report on Friday. It was good, but not great. It didn’t show too much growth such that it scared the Fed, and it wasn’t so bad that it scared investors. Essentially it was exactly what investors wanted to see.
This led to all four of the main indices posting gains. The Nasdaq led the way with a gain of 1.47% and it was followed by the S&P which gained 0.88%. The Dow tacked on 0.52% and the Russell edged up 0.31%.
On the sector front, nine of the 10 main sectors moved higher on the day with only the utilities sector falling, and even that was only a loss of 0.15%.
The tech sector was the top performer on Friday with a gain of 1.92% and the communication services sector jumped 1.43%. Those were the only two sectors with gains over 1.0%.
The scans remained negative on Friday and that is the eighth straight negative result. There were 63 bearish signals and six bullish signals, so the results weren’t as bad as the previous two nights.
The barometer stabilized a little and finished with a reading of -65.3 after a -63.2 reading on Thursday.
After three straight bearish trade ideas I have a bullish one for you today. The Healthcare Select Sector SPDR (NYSE: XLV) appeared on the bullish list Friday night and there were a couple of things that jumped out on its chart. We don’t have the usual fundamental indicators that I like to look at, but the ETF did recently generate a bullish signal from Tickeron, the AI platform I use.
There are a couple of different items on the chart that caught my eye. I apologize for such a busy chart, but we see a trend channel going back to last October, and we see a Raff Regression channel from mid-February. The fund hit the lower rail of the regression channel last week. We also see that the fund found support at its 50-day moving average. I look for the fund to make another move higher in the coming weeks.
Buy to open the August 120-strike calls on XLV at $4.40 or better. These options expire on August 20, 2021. I suggest a target gain of 75% and that means the fund will need to reach $127.70. This target is above the recent high, but based on the upper rail of the trend channel and the regression channel, it seems like an attainable target. I suggest a stop at $119.50.
— Rick Pendergraft
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