As Icarus in Greek mythology, the recent high-flying tech stocks continue falling from the sky. But last year's forgotten under-performers; Energy, Financials, Value and Small Caps – all are having their day in the sun. Sector and Style box rotation goes on.
The big development we see which is not yet reported in the press is that the beaten down US Dollar broke out significantly to the upside from its basing formation which started developing with its low on January 6, 2021 and tracked here by Euclid's weekly analysis. A rising US $ is not a positive for Emerging Market stocks. European stocks are behind those in the US with the exception of European financial stocks.
It has not happened since May 2008, but the NYSE is now the dominant market over the NASDAQ. This is consistent with the anticipated reopening of the US economy - as well as other developed economies around the world - with the flood of stimulus dollars to be released by Congress. The all-powerful, vigilant Bond market has caught a whiff of inflation and sent yields sharply rising, with bond prices plunging. (Bond yields and prices move inversely).
The S&P 600,400 and 500, European Indices remain in strategic Bullish trends. US small and mid-caps continue leading; the NASDAQ and China are now on Bear alert.
Equity Styles: Large Cap Value dominating Large Cap Growth. Small and Mid-cap stocks (particularly Value) continue outperforming Large Caps.
30-year US Treasury Bond Yield rose to 2.31%, 10-year Note Yield rose to 1.59%. The 2-year - 10-year Yield curve rose to 1.42 and is strongly positive.
The Australian Dollar, British Pound, Euro all weakened significantly against the US dollar, the Yen plunged vs. the US dollar. The US Dollar broke to upside from a base-building (since December) pattern. Gold is Bearish at oversold level 2 and continues in a downward trend.
Short term Market indicators show positive divergence with NASDAQ Comp and NYSE indices. We may see the markets bounce up this week.