Transportation Stocks still showing dramatic outperformance

Near-term US Equity trends are positive but nearing overbought levels as SPX and QQQ push higher following their move to new all-time highs, while IWM, Equal-weighted SPX, and DJIA have lagged.  The US Dollar looks to be kicking off its fourth week of declines, while WTI Crude Oil managed to achieve a minor bounce on Monday as part of an ongoing selloff.  Market breadth has lifted to near short-term overbought levels in recent weeks, but Technology is the only of the 11 Equal-weighted ETFs that has pushed back to new all-time highs. Overall, there remains no evidence thus far of US Equities beginning to consolidate the recent rally. Until that changes and recent trends are violated, it pays to expect even higher prices in the days to come. Similar to last week’s thinking, it’s arguably right to be long Financials, Technology, and Industrials as sector Overweights while expecting the Defensive sectors might still show market weakness. Bottom line, I expect the recent sharp move will likely require consolidation in May. However, at present, it’s prudent to watch for evidence of trend deterioration before attempting to sell into this rally.  Pullbacks in the next month should be seen as dip-buying opportunities.

Following three straight weeks of 3% gains in $SPX, prices have still not shown any indication of backing down. For those hoping to witness some consolidation to buy dips in the next few weeks, this hasn’t gotten underway yet.

As shown below, until/unless the short-term uptrend starts to give way, there remains no proof that the next 50-100 points have to be lower.  It’s proper to keep a close eye on market breadth, which should give some evidence of waning prior to any selloff.  While this did happen on a couple of days last week, the strong finish to the week alleviated those concerns.

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