The major stock market indexes continue to consolidate mostly through time. Small caps are underperforming large caps, which has made chasing breakouts challenging in many occasions. We haven’t seen any strong buying pressure so far in 2017. There has been a little uptick in selling pressure, but nothing major.
Two major trading themes have defined 2017 so far. I don’t know if this will continue to be the case in the near future:
- Weak U.S. dollar, strong emerging markets. The U.S. dollar is down 2% year-to-date. For the same period, emerging markets (NYSE:EEM) are up 5.5%, Brazil (NYSE:EWZ) is up 13%, China (NYSE:FXI) is up 5%, gold (NYSE:GLD) is up 5.6%, gold miners (NYSE:GDX) are up 14%.
- Large-cap tech stocks are significantly outperforming. The Nasdaq 100 QQQ (NASDAQ:QQQ) is up 4% while Russell 2000 is down 1% year-to-date.
We have just entered a new earnings season. Thousands of companies will provide new information about the state of their business. As a result, we will see the formation of many new trends, both up and down trends. New trends mean new opportunities.