Weekly Market Review: US Stocks Maintain Bullish Momentum

Bullish Momentum Gets Stronger

As we ended the week on June 30, 2023, the US stock market maintained its bullish status, demonstrating a strengthening trend. Over 60% of mid-cap companies listed in the S&P 400 Index confirmed their positions above their 200-day moving averages, indicating a robust bull market. (see Table 1).

Sector Performance and Market Breadth

Diving deeper, nine out of eleven sectors now display a bullish status, as per last week's indicators (Table 2). When we aggregate the weighted signals of all S&P 500 sectors, the bulls' strength clocks in at 71.47%. Leading the charge relative to the S&P 500 benchmark (SPY) are Technology (XLK), Consumer Cyclical (XLY), and Communication Services (XLC) sectors.

Despite the Industrial sector (XLI) trailing behind SPY, it has held its bullish status since December 27, 2022, and remains in an upward trend. On the RRG charts, both XLK and XLY are outpacing SPY and hold strong positions, suggesting they are top choices for a long portfolio (Table 3). The seasonality of both these sectors is positive in July and August.

Asset Class and Global Rotation

The Communication Services sector (XLC), being more speculative, requires thorough inside-group analysis for suitable long industries despite its strength relative to SPY. The Industrial (XLI) and Basic Materials (XLB) sectors, however, present a less clear direction, warranting a careful selection of industries for long positions (Tables 4).

In the asset class rotation, growth stocks are dominating, while value stocks are underperforming (Table 5). This dominance extends to overall asset class rotation, with equities leading the way, while bonds continue as the underdogs, recently joined by the commodity group (Table 6).

On the global front, the US stock market remains a leader in capital rotation, with Brazil and India joining the leading position this past week (Table 7). Russia's RTSI Index has pulled back from its 200-day moving average, indicating potential weakness in the Ruble, as suggested by the rotation heading south.

Conclusion: Bullish Trend Persists

In summary, the US market maintains its bullish status and momentum. Sectors rallying and recovering from the year's initial corrections are driving the upward trend. The equity class, especially, continues to attract capital, evident from its trajectory on the RRG chart. The current scenario suggests we are more likely to witness continued growth rather than a significant downturn.

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