Chinese Equities start to outperform SPX with falling Dollar & Bifurcation within US Technology

Near-term Equity trends are short-term bullish, and both SPX and QQQ have pushed back to new all-time highs while the broader market has remained far choppier lately. Big-cap Tech has begun to assume its former leadership role again and should allow for Equities' strength into late February. The notable slowdown in sectors like Financials, Industrials, Healthcare, and Discretionary won’t be immediately bearish technically for the US benchmark indices, but simply something to monitor closely in the weeks to come. After-hours earnings from nearly 10% of the SPX could be a positive for markets on Thursday, judging from the after-market strength in stocks like $META and $TSLA post earnings.  However, the bigger technical development this week has been the rapid deterioration in the US Dollar, and this has helped to spur strength in many Emerging markets, including China. 

As seen below, the $DJIA has not followed suit to the movement in either SPX or $QQQ lately, and this, along with Equal-weighted $SPX, remains churning in range-bound consolidation. This negative divergence doesn’t need to be immediately bearish but will be something to keep a close eye on, if/when market breadth starts to deteriorate in the next 3-5 weeks at a time when prices and bullish sentiment are both rising.

As shown below, $DJIA’s range is bound by $49,633, and this needs to be surpassed to help restart a broad—based rally in my view.

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