HSBC: Stocks look like they could 'melt up'

Stock are going up and to the right, according to the technical analysis team at HSBC.

The group, headed up by Murray Gunn, observed a number of key indicators that point to a higher move for the S&P 500 over the next few weeks.

“The S&P 500 Industrials sector has given a bull signal with momentum turning higher on the back of a positive Cyclical Trend Indicator,” wrote Gunn in a note to clients Monday.

“Added to the upside breakout in the FANGs highlighted in our publication of June 2, this is further evidence that a melt up in US stocks is becoming an increasing probability.”

The thinking here is that both manufacturing stocks and consumer-related stocks such as the FANGs (Facebook, Amazon, Netflix, and Google by HSBC’s definition) are looking strong using their preferred method, the Elliott Principle.

The Principle posits that investors move between periods of bullish and bearish sentiment in a consistent pattern, and based on the current charts, it appears that the S&P 500 is going into a period of bullish thinking. (Our full explanation of the Principle can be found here.)

So in Gunn’s analysis both Industrials…

.. and the FANGs have strong bullish trends forming to support them.

Basically, the upshot here is that stocks are going higher for the near-term so get on board while you can.

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