Recent market developments are encouraging and have improved the overall health of the market, which has also incrementally improved our outlook. At the same time, there is still more to be desired before we can have confidence in the prospect of a broad market rally.
- Emerging Markets. An important signal of substantially improving risk appetites, emerging markets (EEM) are staging a bullish RS reversal relative to both the S&P 500 and MSCI ACWI (ACWI), and price is arguably bullishly inflecting as well. China (FXI) is helping lead the turnaround.
- US dollar (DXY). The DXY is on the cusp of a short-term breakdown within the confines of the longer-term rising wedge. We continue to believe a gradual weakening of the USD would aid EM and international equities.
- PHLX Semiconductor Index (SOX). The SOX index managed to notch a new all-time high and hit new RS highs not seen in nearly 18 years. This is another great sign for the broad market considering the cyclicality of semis.
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