At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
The weight of the evidence continues to overwhelmingly lie in favor of the bulls.
The major indices are above important levels and are well on their way to achieving our targets. We're seeing sector rotation into offensive, cyclical areas of the market, and away from defensive, which is all confirming these new highs.
Commodities are showing incredible strength in the face of extreme positioning, reflecting the control buyers have in these markets.
And interest rates have claimed an important level, supporting the rotation into risk assets.
Let’s jump right into this week’s report with our US index table.
SMIDs had an outstanding week, with the Large-Cap indexes not far behind.
In previous reports, we outlined our short-term caution with names down the market-cap scale, pointing to logical areas for these indexes to digest these recent gains. It seems buyers have made other plans.
In the strongest of trends, we see buyers push prices through important levels of resistance like paper, and this time was no exception. This all confirms our view that a long-term bear-to-bull reversal has occurred in favor of SMIDs.
And this occurring after Large-Caps have set the foundations to continue their primary uptrends. So it's not that Large-Caps are weak, it's just that SMIDs are incredibly strong at the moment.
Small-Caps $IWM vs Large-Caps $SPY and Micro-Caps $IWC vs Mega-Caps $DJI are now above areas which would've been logical to see some digestion of these gains. While Mid-Caps relative to Large-Caps still have some work to do, if these ratios remain above these critical levels, we should be looking to add exposure to names down the market-cap scale.
We've been hitting on this theme for some time now, so this is nothing new...
Seeing rotation into SMIDs is a great sign of underlying internals supporting this market higher.
In fact, a near-record 87% of all Russell 3000 stocks have outperformed in the last 3 months.
No matter whether we're looking to Industrials, Financials, Healthcare, or Technology, there is an endless opportunity for new names to buy in this environment.
It's paying to not be overly picky, but rather continue to lean on the winners as we always do and to never chase over-extended, high-flying names, especially with such broad leadership in this environment.
Moving now to our Sector ETF table.
Energy $XLE was the winner of the week, with the defensive sectors lagging behind.
You need to have a subscription to access this content in full.
