Recently there has been evidence of weaker economic activity, but you wouldn't know it looking at the growth heavy Nasdaq and small cap indices yesterday. I know I sound like a broken record, but there's not a lot going on out there right now.
The dollar has been drifting lower for the last week or so, as has the yield on the 10-year Treasury. This is keeping any concerns of inflation, or a Fed move, at bay for now.
The weakness in the dollar hasn't had a positive impact on the price of oil, something we would normal see, and that's another sign that the economy is not quite booming yet. This is an obvious bear flag and it is clinging to the support of the 50-day EMA and could be a catalyst that the bears might be waiting for to get more aggressive on the downside, but right now the quiet action has them hibernating. It has flirting with that support area for about 15 straight days now.
Next week the banks start reporting. They are not normally big market movers, but with a market begging for a catalyst, perhaps they will have some impact. We've been mentioning concerns over the bottom line of banks that may have been negatively impacted by the Archegos fund that went bust, and whether more victims may become made public.
Right after the bell on Thursday, without any news, the futures did pop modestly higher in comparison to the quiet action we saw during the opening trading hours leading up to the close. Levis reported earnings but they don't really have market moving power, so we'll see how that translates into Friday's opening.
The S&P 500 (C-fund) made a nice move higher when it had some reasons to be sluggish. After the big rally off the March 25th low, it made another new high after just a two day pause. I often say that once you notice a pattern, it's probably about done. So far that has come true as we've seen every breakout fail and fall back below the breakout line several times over the last few months, and so far this one has not. The open gap still sticks out like a sore thumb as a possible pullback target.
The DWCPF (small caps / S-fund) bounced back nicely just as I thought it could be peaking again. It's still below Tuesday's high but it's starting to look like a bull flag. A breakout would likely test the larger descending resistance line near 2200.
The EFA (I-Fund) also had a nice day recapturing the failed breakout from earlier in the week. The falling dollar lately is certainly helping this situation.
BND (bonds / F-fund) was down on the day as it backed off the top of that bear flag we've been tracking.
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