The broader stock market continues to battle divergences in what appears to be a tale of two markets.
That said, the laggards (Nasdaq Composite and Russell 2000) appear to be reversing higher here and could provide a lift to the broader stock market indices into mid or late May.
Commodities continue to be strong as well, while the US Dollar is on watch.
Here are 8 things that active investors should be watching in the financial markets:
1. Thursday looks to have been important in turning higher in a manner that can allow for followthrough higher, despite the ongoing intra-market divergences between indices. The Nasdaq is looks to be bottoming along with Russell 3k and Russell 2k. This could result in a bounce into mid-to-late May.
2. Commodities continue to make stellar gains, with Coffee and Cotton turning higher to join the parabolic move in the Grains. While consolidation does look possible if the Dollar begins a counter-trend bounce, Commodities should be overweighted over the next 12-24 months.
3. US Dollar has been higher nearly 80% of the time between early May and May 21st. This is one factor that argues for possible Consolidation.
4. Gold and Silver look to be turning up sharply but end of week movement by Treasury yields and US Dollar should confirm whether this strength continues in the weeks ahead. For now, small longs look attractive, but focused in Gold, Silver mining stocks more than the Commodities themselves.
5. Crude oil looks to be peaking out near-term and technically i expect a minor rotation away from Energy in May.
6. Healthcare, (Specifically Pharma, Services) along with Retailing, and Financials should be favored in the days/weeks ahead, while Technology should be avoided except for those with very short-term timeframes for a bounce.
7. Emerging markets continuing to deteriorate and underperform despite the Dollar largely moving lower since early April. Now Dollar should rally in the next couple weeks which might put this group under further pressure. EEM has been flat and has underperformed, and EEM peaked out when China, Japan, India, and Hong Kong did, in mid-February
8. Cryptocurrencies have played their own “musical chairs” with Bitcoin weakening while Ethereum, Ethereum classic, Bitcoin cash, start to play catchup. Gains in some have been extreme and this parabolic rally is expected to reverse within the next 2-3 weeks for weakness into June.
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.