The Chicago Fed’s National Activity Index increased (emphasis added):

Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +4.11 in June from +3.50 in May. Three of the four broad categories of indicators used to construct the index made positive contributions in June, and two of the four categories increased from May. The index’s three-month moving average, CFNAI-MA3, moved up to –3.49 in June from –6.36 in May.

I’m usually skeptical of “all in one” economic indicators due to questions about the weighting of components. However, this report is illustrative for two reasons:The diffusion index shows that the number of positive and negative data points is near even, which means there’s plenty of positive data.Three of the four components (all except sales, orders, and inventories in purple) are positive.

In other words, there are ample statistical reasons supporting the bullish case.

Let’s check in on the FAANGM stocks (which combined have a $6.847 billion market cap):Apple (top left) is in a strong rally. Amazon (top row, second from left) is also a solid performer. While Facebook (top row, second from right) has risen modestly, its chart is in a sideways trend. The company has lost advertisers over its monitoring policies. Google (upper right) is in a mini-rally that started at the end of June. Microsoft (bottom left) and Amazon share the same chart pattern. Netflix (bottom right) is consolidating a recent move higher.

Here’s the Relative Rotation Graph (RRG) for the 11 largest US stock sectors:Technology (XLK) is now losing momentum relative to the SPY. Since this sector comprises 27% of the SPY, this could slow the SPY’s ascent. Communication services (NYSEARCA:XLC)(11% of the SPY), is about to move into the “weakening” sector. Consumer discretionary (XLY)(11% of the SPY) is trending in that direction. Yesterday I noted that defensive sectors were mostly in a short-term rally. Utilities (XLU) and Staples (XLP) are now rising, heading towards the improving section of the chart. Industrials (XLI) and Financials (XLF) are gaining momentum. Combined, the (XLF) and (XLI) are only 17% of the SPY, so they’d have to rally strongly relative to a declining XLK and XLC to keep the average afloat.

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Let’s take a look at today’s performance tables:

Overall, not much of a day. Mid-caps were the top gainer but they were only up 0.77%. Oddly, micro-caps were the top loser but they were only off 0.69%. Outside of mid-caps, all the other “top performers” were large-cap indexes. Also note that the long end of the Treasury market was up fractionally.Three of the top-performing sectors are defensive — that’s never good for the bulls. The rest of the table doesn’t give us much additional information.

In an ideal breakout, prices advance strongly through a price level. The bar on the breakout day has a very long body and volume is high. Ideally, the next day prints a similar pattern to show enthusiasm for the rally. And, all the indexes participate.

Then we have this breakout, which is pretty unimpressive right now.Yes, the SPY did move through a key price level. It has consolidated gains right above that level.

But other indexes’ charts are weak.Micro-caps broke out but are now consolidating right above key price levels, as are … … small-caps, and …… mid-caps.

Adding to the problem is that the Treasury market is also moving higher.The IEF is in the middle of a modest rally that started on June 15. The TLT started a rally on the same day. Prices are right at 30-day highs.

Ideally, the Treasury market sells off as traders leave the safety of the fixed-income market for the higher profit of equities. That is not happening right now. And, riskier indexes (the smaller-caps) aren’t advancing in a very strong way either. That’s not to say that they won’t, just that they haven’t yet. And that’s why this breakout is — so far — unimpressive.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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