The S&P 500 SPDR (ARCA:SPY) managed to close very near a new high, indicating a likley breakout and another rally before the end of the year. While volume is expected to be muted during this holiday week, Industrials have been the hottest sector recently, and should lead the market through to end of the year if the buying continues. A continued push above $182 in the S&P 500 SPDR keeps the rally alive; otherwise it remains in a consolidation between $182 and $177.50. Focusing on stregnth remains the primary strategy during this uptrend, with Industrials currently offering some of the best setups and relative strength.
Industrial Select Sector SPDR (ARCA:XLI) broke aggressively through the top of the prior consolidation, indicating continued strength at least for the short-term. Initial upside target is $52.60. With a weekly average range of $1.16 the target is within range before the end of the year. If buying continues into the new year the next target is $54.90. The price should find support above $50.50, but a drop below indicates the upside breakout could be false and the price will continue to consolidate. The trend remains up until the price breaks below $49 (preferably a close).
Danaher Corp. (NYSE:DHR) also created a new high this week, pushing beyond highs of the recent consolidation. $75.75 should now act as support as buyers step in following the breakout. A decline much below that signals the stock is continuing to consolidate and the move higher is put on hold, at least for the short-term. Initial target for this week is $78.50, with an additional target at $82 if buying persists into the new year. As long as the price stays above $72.80 the trend remains up, but if the upside breakout does turn out to be false, then it is quite possible the price will break below that level if tested.
Emerson Electric (NYSE:EMR) had a very strong week, significantly clearing recent highs. Having moved out of the consolidation, $68.50 to $68 should now act as support on minor pullbacks. The next target is $71.22, which could be hit even during this shortened trading week. A drop below $68 indicates the consolidation is continuing and the upside break was false. The uptrend remains in effect as long as the price stays above $66, but if the price declines to that point following a false (upside) breakout it is quite likely the price will continue to decline.
Eaton Corporation (NYSE:ETN) has been pushing higher through late September, creating higher highs and higher lows. The break higher last week likely has some gas left, pushing the price into the $78.60 region. This target is within striking distance this week. $73.50 to $73 is now short-term support. If the price falls below $71 a larger decline is potentially underway as the price moves down toward the bottom of a trend channel at $68.
The Bottom Line
With it being a holiday week, expect light volume, but also potentially another pop higher before the new year. The S&P 500 SPDR finished last week right near an upside breakout point; a continued push results in a year end rally. Indstrials have been the hottest sector, and have already broken higher, showing market leadership. Therefore, heading into the end of the year these stocks should continue to perform well relative to many other sectors, especially if the overall stock index see upticks (as expected) this week as well.
Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.