After devouring the bears this month (+13% on average), the bulls needed some Tums to digest overeating this week. What happens next seems to be a coin toss. However, two things are clear, first, there has been a rotation to small caps and second, any country that intelligently navigates the COVID-19 virus will reap the rewards financially. So far, the winner is Taiwan by a large margin because it was out front in its early response to the virus.
Oil prices at zero is not a sign of a robust economy. Along with the Transportation sector lagging, this shows the rally is not on good footing, despite all the helicopter money.
This week’s highlights are:
- Risk Gauges are still positive but are looking vulnerable
- Grandpa Russell 2000 (NYSE:IWM)) closed up +2.2% for the week while other key US indexes closed marginally down
- Volume is confirming the rotation into small caps (IWM)
- Leading spec sectors Sister Semis NYSE:SMH) and Biotech (NASDAQ:IBB) are showing fatigue
- Risk off sectors such as Utilities (NYSE:XLU) and Consumer Staples (NYSE:XLP) underperformed yet again
- Gold and Bonds, both risk-off plays took a breather, digesting large gains this year
- iPath® Series B S&P 500® VIX Short-Term Futures™ ETN (NYSE:VXX) (Volatility) tested the lower end of their Bollinger® bands and bounced, showing the bear market is likely intact (at least longer term)
- All key indexes closed beneath their key short-term moving averages and the NASDAQ 100 lost its bull phase
- Soft Commodities (NYSE:DBA) could be bottoming