Monday Sector Strength
Below is a weekly chart of the intermarket. Bonds have essentially been moving sideways for quite a while, and there are some who feel that the resulting low long term rates we've enjoyed is the key to the success of the economy and equities. Commodities have been consolidating in their own sideways movement after a huge run higher. A break above the range would probably confirm some worldwide economic strength, but would probably also correspond with US Dollar weakness and perhaps a break to historic lows. The economic strength would be welcome but the Dollar weakness would be worrisome.
The chart below is the same intermarket but with a monthly, 25-year timeframe. This chart shows the SPX near its former highs. Reaching this level is an important and favorable milestone for equities, but is also a level where resistance is expected and the trend in equities may pause. If the SPX touches this upper resistance level, there is a chance it just may occur at the same time that commodities break above their trading range shown in the weekly above, and when the US Dollar breaks below lower support. This could be an important point in the intermarket relationship and could work against equities, at least for a short time.
The chart below is a weekly borrowed from John Murphy showing the relationship of foreign equity markets to the US equity market. Both have performed very well, but the ratio chart shows foreign markets in a consistent trend of significant outperformance of the US Market. Murphy sees this outperformance as the result of the weak US Dollar.
Below is another weekly chart borrowed from John Murphy showing a different view of the same relationship of the US Dollar and the Dow World Index vs the US Wilshire 5000. Not much strength showing in either.
