Chart Advisor: Stocks Post a Perfect Month

By J.C. Parets & All Star Charts

Thursday, 29th June, 2023

1/ Stocks Post a Perfect Month

2/ JPMorgan Makes the Move

3/ Is Copper Due for a Bounce?

4/ Airlines Fly Through Resistance

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1/ Stocks Post a Perfect Month

Not only is June now in the books, but the second quarter and first half of 2023 are officially behind us as well. Let’s take a step back and review the sector performance.

While the majority of sectors are positive on a year-to-date basis, we’ve been looking at whether lagging groups like financials and energy will pick up the pace and play catch-up. This month, it appears that this is finally happening.

Here is the monthly performance of all the large-cap sector SPDR ETFs:

Notice how energy and financials are toward the top of the list with gains of roughly 6% in June. We’ve also included the small-cap Russell 2000 Index (IWM) in the performance chart, as it is in the laggard camp as well.

IWM gained 7.45% this month, marking the first time the small-cap average has outperformed the Nasdaq 100 all year. We think this is constructive, as it speaks to a healthy broadening of the current bull market.

When we look at our expanded universe of 42 sector ETFs and indexes, every single one was higher in the month of June. Long story short, this is bull market behavior at its finest.

2/ JPMorgan Makes the Move

When we look at individual stocks, JPMorgan Chase (JPM) stands out this week as it emerged to new 52-week highs.

We treat JPM itself as an index, as it provides us with excellent information regarding the banking industry and financial sector at large.

As you can see, price is piercing through a critical level of overhead supply around $145. This level coincides with the 61.8% retracement from the last decline, making this breakout even more notable. JPM is also making new highs relative to its financial sector peers (not shown in chart). We’re looking for additional confirmation in the form of an overbought momentum reading next week.

If the biggest bank in the U.S. is achieving new highs, we don’t see the stock market and global economy falling apart anytime soon. Instead, banks and other underperforming stocks could start catching higher.

3/ Is Copper Due for a Bounce?

Few commodity-related stocks provide a closer pure play on their underlying commodity market than Freeport-McMoRan (FCX). 

If you don’t want to trade copper futures, look no further than FCX, as 90% of its revenues come from copper mining.

Because of this, notice how closely the stock trades alongside the price of copper:

We don’t want to make the assumption that these lines resolve in opposite directions over longer time frames. So who’s got it right?

Will the near-term weakness in copper abate as it catches higher to a more resilient FCX? Or will FCX correct lower to its underlying commodity market?

Based on the overwhelming strength from the industrial and materials sectors in June, there is evidence to suggest that copper futures could be due for a bounce.

4/ Airlines Fly Through Resistance

Cruise lines are moving and airlines are taking off. People are going places. Such a bustling travel industry is typically not associated with a weak consumer or economy.

At the beginning part of June, Delta Air Lines (DAL) broke above its early 2023 resistance zone. As the biggest holding in the global airline ETF (JETS), this was a sign that other airlines had positive performance ahead of them.

We are now seeing that take place as the rest of the industry is really kicking it into gear and following Delta’s lead. It took a few weeks, but JETS is now sporting the same pattern as DAL as it breaks above its equivalent level at the year-to-date highs.

With groups like airlines and transportation stocks resolving from textbook bases and making fresh 52-week highs, the market continues to send risk-on signals.

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Originally posted 29th June 2023