Small Caps and Cyclicals Drive a Rally as Growth / Nasdaq Underperform on the Day - Chaikin Analytics

Small Caps and Cyclicals Drive a Rally as Growth / Nasdaq Underperform on the Day

US equities finished higher in Monday trading in a rally that was led by small caps and the cyclical sectors of the market. Treasuries were weaker with the curve steepening. The dollar was stronger vs the yen but weaker vs the euro and sterling. Gold finished down 1.2%. WTI crude settled up 7.2%, though off best levels of the day.

  • Outperformers: Energy +7.55%, Industrials +6.61%, Financials +5.32%, REITs +4.86%, Materials +4.56%, Utilities +4.14%, Consumer Disc. +3.20%
  • Underperformers: Healthcare +0.94%, Consumer Spls. +1.66%, Communication Svcs. +2.15%, Tech +2.56%

S&P futures are down 0.3% in Tuesday morning trading. Asian markets were higher overnight with South Korea and Hong Kong leading followed by strong gains in Japan, Australia and Taiwan. European markets are mostly lower. Treasuries are stronger across the curve. The dollar is better on the yen cross but lagging the euro and sterling. Gold is up 0.2%. WTI Crude is up 0.2%.

Silver: Too Far, Too Fast

The iShares Silver Trust has made a strong move to the upside of late. The fund is now overbought based on our indicator but Chaikin Money Flow is extremely bullish. SLV is above the rising long-term trend line but is now battling price-based resistance in the $16 – $17 range. A break of that level would set the stage for a move beyond the 52-week highs. 

A Closer Look at Sector Rotation

The Communication Services Sector (XLC) Relative to the S&P 500

The S&P 500 Communication Services sector relative to the S&P 500 has rallied off of support at the 200-day moving average and the top of the consolidation zone and is nearing recent highs. The RSI remains in bullish ranges and has not become oversold in nearly a year. Trend: Bullish

S&P 500 Consumer Discretionary Sector (XLY) Relative to the S&P 500 

The Consumer Discretionary sector remains above the 200-day moving average after exiting the consolidation zone to the upside. The RSI has moved out of bearish ranges and is on the verge of reaching overbought levels. The ratio is now near resistance; a break to the upside with help from names other than AMZN would be encouraging for equity bulls.  Trend: Neutral / Improving

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