Despite the snowstorms last week in the upper Midwest, Spring is on its way north at about 100 miles per week, having arrived here in the southeast two weeks ago. Perhaps coincidentally, the market has sorted out its indecisiveness of the past few weeks and, by our indicators, has warmed up and is ready to move ahead with new leaders.
Notably, small cap stocks which have been lagging the S&P 500 since mid-March of this year through the third week of April have reversed direction and are gaining strength vs. the S&P 500 index. The same can be seen for the S&P 400 mid cap index and the Equal Weight version of the S&P 500. Generally, when there is weakness in the market, it shows up first in the riskier small cap stocks.
We have any early buy alert on Emerging Market, as its strength vs. the S&P 500 is improving. Some of this strength can be attributed to the inversely correlated fall in the US Dollar, as many export commodities are priced in US Dollars. A weaker US Dollar inflates the price of imported goods and services, particularly from developed economies.
For some time, we have noted that Large Cap Growth stocks have underperformed Large Cap Value stocks, from early November 2020 through early March 2021 before moving in tandem. In mid-April 2021, Large Cap Growth began to inch ahead, and we can now confirm its renewed leadership.
The drop in US Treasury 10-year Note and 30-year Bond yields (since peaking March 18, 2021) may be ending. The recent rise in bond prices may be ending also since bond prices fall when Yields rise. If fact we have seen positive stirring of regional banking stocks within the past few days after moving sideways for the past five weeks.
All US equity indices and Europe remain strategically Bullish. Small caps now regaining strength vs. S&P 500. Emerging Markets flashing buy alert.
Equity Styles: Large Cap Growth trend now confirmed stronger vs. Large Cap Value trend. Small and mid-caps now regaining strength vs. large caps.
Ranked Sectors: Trend leaders - Energy, despite recent weakness, Transportation, Financials, Materials; Laggards - Health Care, Utilities, Consumer Staples.
Decline of 30-year US Treasury Bond and 10-year Note Yields may be ending, nearing rising Long Term trend lines, 2-year Note Yield inching up. Yield curve spread narrowed.
Australian Dollar, Euro, British Pound in Bullish trends; Yen on Bull alert; US Dollar fell. Gold, after base-building since March 8, Bullish is on an early buy signal.
The US Dollar confirmed reversal to Bearish from Bear alert. US Dollar fell to 90.78 from March 31, 2021 high of 93.47.