Stocks Trade to Record Highs Ahead of the January Jobs Report Today

US equities finished mostly higher on Thursday with the S&P and Nasdaq closing at new record highs for the second straight session. Communications Services, Technology and REITs were the best performers. Energy and Financials lagged. Treasuries were mixed. The dollar was stronger vs the yen and the euro. Gold closed up 0.5%. WTI Crude finished up 0.4%.

The Invesco QQQ Trust (QQQ) has a Very Bullish Chaikin Power Gauge ETF Rating and continues to outperform the SPY. The OB / OS Indicator is moving higher from an oversold position and Chaikin Money Flow is bullish. QQQ is above the rising long-term trend line, trading at a record high yesterday. The Power Bar Ratio is bullish at 38 to 4.  

S&P futures are down 0.3% ahead of the January non-farm payrolls report; estimates call for the addition of 162,000 jobs. Asian markets were mostly lower overnight, though China finished higher. European markets are lower this morning. Treasuries are seeing strong gains across the curve. The dollar is stronger vs the euro but weaker vs the yen. Gold is up 0.1%. WTI Crude down 0.4%. 

Key Themes and Relationships

High Yield vs. Treasuries

The relationship between high yield bonds (HYG) and intermediate term treasuries (IEF) has tested and, thus far, held support but remains below the declining 200-day moving average. The RSI is moving higher from an oversold position but has yet to break from bearish ranges. A break of the early 2020 highs would serve to change the trend that currently remains modestly risk averse. 

Small Caps Relative to the S&P 500

The iShares Russell 2000 ETF (IWM) remains below support (now resistance) relative to the S&P 500 as it continues to trade below the declining 200-day moving average. The RSI of the ratio remains in bearish ranges signaling that momentum remains to the downside.

Consumer Discretionary Relative to Consumer Staples (Equal Weight)

The ratio of consumer discretionary stocks relative to consumer staples stocks continues to trade below the declining 200-day moving average as it remains in a neutral trend (but with a downside bias). The RSI is in the middle of the range and has not been able to become overbought or oversold for more than a year. When discretionary is lagging staples, it is a sign that investors are less willing to own the riskier areas of the market.  

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