US equities finished higher Wednesday with investors appearing to price in further stimulus in the US on the heels of action out of the EU. REITs and Utilities outperformed. Energy and Financials lagged the broader tape. Treasuries were a bit weaker at the front end and stronger at the back of the curve. The dollar was stronger vs yen but softer again vs the euro and sterling. Gold finished up 1.2% (silver also extended a big rally). WTI Crude was little changed.
We have recently been open to the idea of rising inflation due to the record amounts of stimulus that has been injected into the global economy. This view appears to be playing out if silver is any guide. The iShares Silver Trust has exploded to the upside of late. The fund is now stretched to the upside but pullbacks to the $19 – $20 range should provide a compelling entry point.
S&P futures are up 0.4% after closing higher for the fourth consecutive day. Asian markets were mixed overnight. European markets are seeing good gains. Treasuries are mixed with the curve flattening. The dollar is extending its recent underperformance on the euro cross while flat vs the yen. Gold is up 0.8%. WTI Crude is up nearly 1%.
Looking at Market Breadth
S&P 500 Breadth
The Advance / Decline Line for the S&P 500 is near the highs seen earlier this year as the index continues to knock on the door of a breakout from the consolidation that began in June. This datapoint strengthens the case that the February highs for the index are likely to be reached, in line with our prevailing view on the market from a trend perspective.
The percentage of stocks in the S&P 500 that are currently on MACD sell signals now stands at 18%, down from 34% last week. At the same time, more stocks in the index are on buy signals this week vs last week. These indicators continue to move in the right direction for equity bulls and have broken their near-term trend lines.