The recovery in the earlier leaders has developed further since Tuesday's update. Semiconductors have recovered last Thursday's decline, while equal-weight stocks have stayed near their recent highs. That is the combination we were looking for: technology contributing again without the stronger areas giving back their progress.
The Fed decision did not interrupt the stock market's recovery during regular trading. Treasuries, however, pulled back, and the earnings reaction after the close brought renewed selling in Alphabet. The rally attempt has gained substance. Today will show how it responds to the earnings reports and economic data.
Market Commentary
Monday brought a rebound in the earlier leaders. Technology, consumer discretionary and industrials led the advance, while some of the defensive businesses that had been holding up better took a pause.
That fits the possibility of an upside surprise discussed over the weekend. Buying returned to the weaker areas while equal-weight stocks also continued to edge higher.
Friday brought a pullback in some of the areas that had been holding up better. Equal-weight stocks and Treasuries gave back part of Thursday's gains, while semiconductors managed a small rebound.
Overall, Friday brought little change to the setups in stocks, Treasuries, crypto and the Dollar Index.
Gold extended Thursday’s downside breakout.
The divergence we have been following became more pronounced over the past two sessions. RSP continued higher and reached the target area discussed last week, while Thursday's selling reversed the Nasdaq's recovery.
Treasuries also advanced into their upside target area.
Monday was a typical market Monday: still nursing a hangover and searching for direction.
We saw a little of the relief rally discussed previously, but trading remained within Thursday and Friday’s combined range.
Tuesday brought a more useful development: the Nasdaq held Monday's rebound while equal-weight stocks and small caps advanced.
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