Info Tech and Health Care have been the highest rated sectors for 10 consecutive months. Energy sector is improving from the bottom of the rankings.

We expect the 245-250 barrier to be tested, and if it is decisively broken, much lower yields could be in the cards.

The Major Trend Index fell 0.04 to 1.15 in the week ended April 25th, driven largely by a moderate loss in the Momentum/Breadth/Divergence category.

Inflation increased and beat expectations. Capacity utilization increased more than expected too, a sign that the slack is being worked off. A much more persistent trend in wage inflation is necessary for a sustained inflationary environment and we are still not there yet. Inflation will be a non-factor in the 1st half of 2014.  Inflation on the producers’ level is still well contained in a narrow range.

Well-rounded factor strength, coupled with an intriguing fundamental backdrop, lead us to our first Materials group holding in a year.

We examine the impact of March’s strong group leadership reversal on the top and bottom of our group model.

In December, we declared the market was likely entering into a cycle where High Quality stocks would shine. Unfortunately, market action since then reminds us of the virtue of being humble.

The fifth anniversary of the bull market was met with fanfare, but the launch of the Large Cap leadership cycle in April 2011 is receiving no attention whatsoever.

Margin debt levels are high, but that’s because stock prices are high. The critical relationship is the comparative rates-of-change in Margin Debt and stock prices.

Based on the historical percentages, the bull market should have a minimum of four to six months of life left. But the market has a way of throwing sand in the gears when you think you’ve begun to understand its internal mechanics.

All ten of the S&P 500 sectors recorded a sequential increase in four-quarter trailing net profit margins. But consider where sector margins stand today relative to their 25-year medians. Eight of ten S&P 500 sectors are recording profit margins well above their long-term medians.

The short end of the yield curve sold-off to price in an earlier-than-expected rate hike, while the long end rallied as the prospect of tightening reduced longer-term inflation expectations.

The “South Korean Discount” comes from high market concentration risks due to: a handful of companies with significant market weights, tight business relationships with suppliers, and high levels of cross-ownership among companies. 

The bull market has pushed short-term annualized performance readings well above median levels, while the longer-term readings remain subdued. But there is a silver lining…

We dusted off our research from 2011 on dividend growers. Somewhat to our surprise, we found fewer qualifiers this time, and a shift from Europe to Asia.

We’ve held this group since August 2012. Its GS Score has continued to improve and currently ranks second out of 120 groups. Solid factor readings, coupled with a brightening fundamental picture in both the industry and the sector, keep us invested in this space.

Nine Technology groups are in the top quintile of our group model, and the sector has strengthened on a relative basis after twice “testing” a trendline that dates back to the early 2000’s tech wreck. There’s reason to believe the new uptrend has longer-term legs.

This closed out the one month old “Higher Risk” signal. We continue to favor high quality credits within fixed income.

Twenty eight months after purchase it still ranks Attractive, but the industry fundamentals have changed.