Futures for the S&P 500 index were little changed late Thursday. Apple (AAPL), Wal-Mart Stores (WMT) and UnitedHealth Group (UNH), all members of the S&P 500 index and Dow industrials, are just below buy points. But a close look at their charts show that all three are lagging: Their relative strength lines, which track a stock’s performance vs. the S&P 500, are at the lows of their current consolidations.
X That doesn’t mean Apple, Wal-Mart and UnitedHealth can’t work. Stocks with lagging RS lines can break out successfully. Facebook (FB) and Microsoft (MSFT) cleared buy points on Jan. 3 in so-so volume and have continued to rise. But both Microsoft and Facebook are still just keeping up with the market, with their RS lines off old highs. If the market pulls back even modestly, stocks with flat to lagging RS lines may be exposed.
Ideally, an RS line should lead or confirm a breakout into new high ground, at least in the short term.
S&P 500 index futures were roughly flat vs. fair value.
Apple rose 0.6% to 175.28 in Thursday’s stock market trading, moving back toward a 176.34 flat-base buy point. But the S&P 500 rose 0.7%, so Apple’s RS line edged lower, right at the recent low. (The RS line is the blue line in the stock charts below.)
Apple’s RS line hasn’t made headway since early May. Even when Apple briefly broke out on Dec. 18, the stock’s RS line was off its prior highs.
On the upside, Apple shares did find support at their 50-day moving averages.
Wal-Mart rose 0.35% to 100.02, flirting with retaking a 100.23 flat-base buy point but lagging the broader market. Wal-Mart had an eventful day for corporate news, announcing broad wage hikes and employee bonuses while also closing 63 Sam’s Club locations, hitting thousands of workers.
Wal-Mart’s RS line did rise gradually for most of 2017, picking up momentum from late September to mid-November.
UnitedHealth rose 0.5% to 225.39 on Thursday. The health insurance giant is a little further from its buy point than Apple or Wal-Mart, roughly 3% below a 231.87 entry.
Like Wal-Mart, UnitedHealth’s RS line was a steady winner for most of 2017, especially from late February to the end of November.
UnitedHealth is set to report fourth-quarter earnings on Jan. 16.
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