Will This Market Roll Over?

Will this market roll over? Here are a couple of charts worth keeping an eye on. I think the broader market will follow these indexes.

Both the Industrials and Transports are testing important levels.

 

Junk bonds look ready to head lower as well, but who knows.

 

Sector Strength

What is this spreadsheet telling us?

I see a lot of red rectangles in the three top panels, and a lot of blue in the bottom panel. In other words, US stocks are weakening, and foreign stocks (denominated in US Dollars) are strengthening.

This trend has been in place since the beginning of 2017, but it became very apparent after the dovish Fed meeting which pushed the dollar lower. Currencies are contributing quite a bit to this relative strength. The dollar has been weak, but it looks like it might be ready to bottom out.

Another factor is that the market ran up on high expectations, and now investors are looking around for the next opportunity. I think they see potential in these foreign markets. Maybe not in the oil exporters, but most other economies are showing life and probably are viewed as undervalued compared to the US.

Other signals in this spreadsheet? Small caps still have a high score and bonds a low score. That is a good sign for stock prices. Financials, Technology, Industrials are leaders. More good news. And the semiconductors continue to lead, and leadership in this group is always a good sign for the economy and stocks.

The bad news is that energy and transportation stocks are weak. That could spell trouble, but it is too early to get too concerned.

Bottom line: Stick with the out-performers, and that now includes the foreign ETFs.

 

Disclaimer: I am not a registered investment advisor. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, hold or sell short any security.

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