Market Pulse

STR Bullets

Mar 21

Written by:
3/21/2016 6:20 PM  RssIcon

US Equities: In previous comments we noted the unhealthy situation where the big cap stocks (the generals) were leading the smaller cap stocks (the troops) during last year’s rally. More recently we noted that, by some measures, this disparity had grown to historic proportions. This week’s data shows that the generals are still out in front. This highlights another concern. During virtually the entire 2009-2015 uptrend the very broad NASDAQ Composite continually outperformed the very narrow DJIA. However, since last September the NASDAQ has underperformed the DJIA by the greatest margin since the 2009 low. Moreover, there has been virtually no relative recovery since the market’s February low. This indicates that the leadership of the market has changed in an unhealthy way.

Global Equities: Developed markets have been lagging their developing market cousins. This is currently being evidenced by the fact that countries such as Brazil and Russia are showing relative strength. As a result, the MSCI Emerging Markets Index completed a double-bottom relative to the MSCI World (ex US) index and has broken out from the resulting base.

Rates: The weekly Coppock Curves for both US 10- and 30-year yields are bottoming. The resulting bullish bias will have the potential to persist until well into the second quarter. That said, the daily oscillators are peaking so it seems likely that the next short term low will also have bullish intermediate implications.

Commodities: We had been counting oil’s sell-off since last summer as the final fifth wave within the post-2013 decline from 110. This final wave had been extending and developing five smaller degree waves of its own. The recent rally through the downtrend lines from last year’s high near 61 and 2014’s high near 107 is evidence that this fifth wave and, therefore, the entire post-2013 (C)-wave decline is complete.

US Dollar: The dollar index has violated its dominant 2014-2016 support trend line. Since we have been counting the post-2014 uptrend as an intermediate (C)-wave, this breach confirms that the index is in its most important correction in many months – at least in terms of time, if not price. Meanwhile, the broad (26 currency) trade weighted dollar index is engaged in what is already its second-biggest correction since 2012 and has broken its 2014-2016 support trend line.

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