SIACharts Logo

Commentary >

 Russell 2000 Index (RLS.I) & SPDR S&P Retail ETF  (XRT) 

The turn of the calendar into November has brought equity markets into the most seasonally favorable time of the year, which runs more or less through April. Several senior indices in the US and Canada have reached new all-time highs and we have had two key breadth confirmations this week. First, continuing our discussions of Dow Theory from recent issues of the Equity Leaders Weekly, the Dow Transports have been soaring this week, and broke out to a new all-time high, signaling the start of a new advance, confirming a recent breakout by the Dow Industrials, and sending a bullish signal. Second, and perhaps more importantly, small and mid cap indices in the US have been breaking out, a bullish sign of increasing breadth and growing participation in the current market advance.

The Fed has officially joined the parade of central banks cutting back on stimulus announcing yesterday that it intends to reduce asset purchases by $15 billion per month, a pace that would see it run down and finish the current program in June of 2022. This timetable is in line with previous hints from the US central bank and has been seen by investors as a bullish sign of confidence in the economy.

In its statement, the Fed suggested it expects supply chain disruptions to ease over time and that it still sees recent inflation pressures as transitory. There is some potential evidence for this as several key commodities have turned downward in the last few days including Crude Oil, Copper, and Lumber. Part of this may be a reaction to a rising US Dollar, but the downturn may also be in response to recent signs of growth slowing in some sectors, particularly a recent decline in US construction spending.

Economic and earnings news continues to roll out over the rest of this week, then drops off dramatically next week, which could give investors and analysts a chance to catch their collective breath. Stagflation remains a key theme for economic numbers with US nonfarm payrolls and Canada employment numbers coming out tomorrow, followed by inflation reports for the US and China next week. Earnings season shifts into the later innings next week with the calendar dominated by smaller companies and headlined by Disney and a few retailers including Canadian Tire.

In this issue of Equity Leaders Weekly, we look at the Russell 2000 Index and the retailing sector as indicators of increasing market breadth, and accelerating accumulation.

Russell 2000 Index (RLS.I)

Keep up to date on the latest financial market news.

Receive a daily newsletter with stock highlights, ETF rankings, weekly market focus and others.