Despite the almost daily touting of new highs by the S&P 500 and DJIA indices, our indicators are suggesting something that can best be described as "engine noise" When we lift the hood, we find the Small Cap index Russell 2000 has reversed direction and began under-performing the S&P 500 since the beginning of this month. In fact, the percent of NASDAQ Composite stocks above their intermediate term moving average has fallen to 44%. Compare this to the NYSE's 74%, NASDAQ 100's 80% and the S&P 500's 92%. Small caps have had an excellent run since the March 23, 2020 low, gaining 125% vs.90% for the S&P 500. It appears that the initial re-opening euphoria is now baked into small caps and it is time to move on to sectors, industries and stocks that are poised for the next stage of economic growth.
US Treasury yields fell sharply last week, and opinions abound as to likely causes. We can say that the 10-year and 30-year US Treasury yields were rising at a torrid pace up until March 18th, paused, then began descending at a brisk clip to their rising intermediate trend line before bouncing up today. Some feel that the market is now believing that the Fed will not raise rates. Our strategic (longer-term) model has Treasury interest rates rising, which would suggest value and cyclical stocks. Right now, growth stocks have caught up and are now on par with value stocks. Markets and interest rates do not move in a straight line. We may likely hear a bit more "engine noise" and experience chop in the markets for the next few weeks.
All US equity indices and Europe remain strategically Bullish. Small caps showing are showing weakness, with Emerging Markets flashing caution.
Equity Styles: Large Cap Growth paused its strengthening trend vs. Large Cap Value. Small caps continue weakening trend vs. large caps.
Ranked Sectors: Trend Leaders - Energy, Transportation, Financials, Materials; Laggards - Health Care, Utilities, Consumer Staples.
30-year US Treasury Bond Yield rose to 2.294%; the 10-year Note Yield rose to 1.601%. Trend lines of each are up. Yield curve spread narrowed to 1.45.
The Australian Dollar is Bullish; Euro and Yen on Bull alert tends; British Pound, Bullish. Gold on Bull alert after base-building since March 8. The US Dollar reversed its strategic trend, now on Bear alert.
US Dollar fell to 91.05 from March 31, 2021 high of 93.47.