The S & P 500, thanks to the outperformance of a small group of technology stocks, enters the second quarter on an upswing. The Relative Strength Indicator, a short-term (14-day) momentum indicator, stands at nearly 63 (30 is oversold, 70 is overbought). The Nasdaq 100, mostly tech stocks, at 68, is positively giddy. Q1: big cap tech is back Apple up 27% Microsoft up 20% Alphabet up 18% Amazon up 23% Nvidia up 90% Alas, the same cannot be said of other large indexes. While the last week of the quarter was positive for all the major indices, those that do not benefit from a tech overweight are still struggling to break out. For example, the Russell 2000 , the S & P Small Cap 600, and the S & P Midcap 400 all broke their December lows during the height of the banking crisis a few weeks ago. That’s not surprising: The Russell 2000, for example, is 17% regional bank stocks. The message is clear: for the moment, the majority of the market returns are being generated by large-cap tech stocks. Even last week’s broad rally lifted the average stock only slightly. I noted that cyclical sectors like industrials, materials, autos, housing and transports had a good week. REITs, coming off one of the worst months in their history, also rose. But that’s one good week in a long, miserable March. Back in early February, 75% of the S & P 500 stocks were above their 200-day moving average. That dropped in half, to 36%, at the height of the banking crisis March 15. Last week saw a significant bounce back, to 54%, but still, after a terrific week, almost half of the S & P 500 remains in a long-term downtrend. “This seeming disconnect reflects a retreat of investors to the perceived safety of the top ten or so best capitalized stocks, which is a stern market warning on its own,” Lowry, the nation’s oldest technical analysis service, wrote in a note to clients Friday. Bulls, of course, are hopeful that the banking crisis will be the ultimate blessing in disguise, forcing the Fed to…
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