Good morning,
Last week, I highlighted short-term risks to the major indexes.
The thesis was, with everything else correcting since early May, tech and momentum stocks were next to potentially catch-down or consolidate.
Instead, everything else caught higher.
Good.
The biggest story last week was small caps, which broke out through multi-month resistance, hitting a 3-month high and arguably completing a major inverse head and shoulders pattern.
They aren’t leadership. But if the measured target on lagging small caps is 17% higher, what does that say about the potential for the rest of the market?
And yea yea the economy. I hear it, I get it. Plenty of reasons to be negative. But what is the market saying?
What would you say about a hypothetical economy if I told you:
Long-term interest rates are moving gradually higher
Industrials are hitting all-time highs
Credit spreads are near their lowest level in 20 years
And small-caps just hit a 3-month high
You’d probably say things in the economy are just fine.
It’s a similar story for inflation, which will be in focus this week with CPI on Wednesday and PPI on Thursday.
A lot of people say it’s a problem. But as today’s report will show, the market simply isn’t worried about it.
This week’s report will review:
What the market is saying about the economy
Important moves from last week
More strength in metals
Inflation and expectations for the Fed
Key relative strength charts
and more!
