When we look back at last week's action, a few things stand out to me. First, the aggressive sectors - financials, consumer discretionary, technology and industrials - held up quite well on a relative basis. That should be seen as a positive. The worst performing group was utilities, which makes sense as the yield on the 10 year treasury ($TNX) soared. The fear of rising interest rates spooked the market last week, but I don't believe we've necessarily entered a long-term period of higher interest rates. Instead, we're likely seeing a bounce in treasury yields after many months of decline. In fact, if we look at a long-term 40 year chart on the TNX, it appears to me that we could see yields rise to the 3.75%-4.00% area and still remain in the downtrend channel that began in late 1983. Historically speaking, that would still leave the TNX at a very low level, conducive to stronger economic growth. Take a look at the more than 30 year downtrend:
Despite the rather large sell off last week in equities, the internet space ($DJUSNS) actually strengthened. We're still waiting on a breakout in this group, but clearly money began rotating to internet stocks in late February and that rotation continued in early March. Look for a close above 900 or a continuing short-term sell off to price support at 865 and the rising 20 day EMA, currently at 861 as potential opportunities for entry into stocks within this space. Check out the recent strength:
Happy trading!
Tom Bowley
