US equities finished higher in Monday trading, though off the best levels. Treasuries were weaker with the curve steepening. The dollar lagged the yen cross but was little changed vs the euro. Gold finished down 0.7%. WTI Crude settled down nearly 25% after plunging 32.3% last week, its biggest one-week decline in history.
- Outperformers: Financials +3.61%, REITs +2.99%, Materials +2.64%, Industrials +2.52%, Energy +2.10%
- Underperformers: Consumer Spls. +0.33%, Communication Svcs. +0.56%, Tech +0.91%, Utilities +1.09%, Consumer Disc. +1.20%, Healthcare +1.31%
S&P futures are up 1.2% after US equities rallied on Monday. Asian markets were mixed overnight. European markets are mostly higher. Treasuries are little changed. The dollar is weaker on the major crosses. Gold is flat. WTI Crude is down 11.4%.
Is the Cyclical Trade Coming Back?
Given the divergences highlighted below and the leadership on the part of small caps, we wonder if the cyclical trade is coming back. One clue can be seen in the performance of Materials stocks. Should this group begin to outperform, it could be a sign of a shift in the dynamics of the market from large to small and from growth to value. For now we are watching but are mindful of the speed with which trends can change in the current environment.
Sector Power Bars & ETF Ratings
There is currently one sector with a Power Bar Ratio which is stronger than that of the SPY and is bullish. Despite the rally over the past few weeks, there are still three sectors with zero Very Bullish / Bullish Stocks.