Russell 3k Advance/Decline hits new all-time highs; Growth favored

Near-term US Equity trends are positive but overbought following SPX, IWM, and QQQ’s recent push to new high territory, while Equal-weighted SPX and DJIA have lagged. Despite price being seemingly stretched and leadership growing a bit narrow, there remains no evidence of any technical weakness that would signal the beginning of any consolidation. While the outperformance in large-cap Technology and specifically, Semiconductor and Magnificent 7 stocks lately has masked some weaker spots within SPX, Technology has been fully able to absorb weakness in other sectors without leading stock indices lower.   Similar to last week’s thinking, it’s right to be long Financials, Technology, and Industrials as the sector “overweights” while expecting the Defensive sectors might lag performance.  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.  Wednesday’s close failed to show much evidence of any pullback getting underway.  Thus, until this happens, it’s right to lean bullish.

As shown below, prices have been grinding sideways a bit this week as WTI Crude has made a mild bounce.  Thursday’s mild decline failed to do much technical damage that would suggest trends are turning lower, and market breadth proved to be just fractionally negative. In general, US Equity markets seem to be sniffing out a coming peace deal in the weeks ahead, and the act of Equity indices holding firm at all-time highs is a bullish near-term development.

While Thursday proved to be a minor negative, this does not technically represent the beginning of any kind of drawdown, in my view. My thinking is that another push higher should begin, potentially next week, as WTI Crude starts to turn back lower. 

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