Global Macro: Stocks Still Resilient

TheStreet.com

NEW YORK (TheStreet) -- World equities continue to rise as global economic data improve. Trading volume in the U.S. this week remains below the monthly norm, but that can be attributed to the lack of important economic releases and coming end of earnings season.

Although fundamentals will no longer be a reason to push equities higher, investor sentiment and fear of shorting a central bank-driven market should keep prices moving higher.

Trade data out of China Wednesday boosted morale in the region. Chinese equities and commodities have shown broad weakness as concerns about the region's growth remain in the discussion. The pair above is of FTSE China 25 Index Fund over Total World Stock Index ETF.


It has seen a drastic decline in relative value since the beginning of the year, but may have found a bottom. With better economic prospects on the horizon, and strength in the commodities sector, Chinese equities could be pushing for a reversal.

The next pair is of Consumer Discretionary Select Sector SPDR over S&P Equal Weight ETF. Cyclical stocks have shown strength recently on a strong earnings season. The U.S. consumer continues to return to the market as the employment picture improves and consumer sentiment rises. The pair above is on the verge of a relative breakout, which would propel both the broader market and cyclical stocks higher.

The final ratio is of Dow Jones Select Dividend Index Fund over S&P Equal Weight ETF. Investors will put their money into higher cap, lower volatile dividend stocks during periods of market uncertainty. This pair indicates fleeting investor fear as markets continue to show resilience.

Investor fear picked up toward the end of the first quarter, as seen in the breaking of the downtrend in the price action, but that sentiment looks to have subsided. As the pair falls, it means investors are pouring more money into lower cap, riskier sectors. As long as the ratio shows relative weakness, US equity markets should continue to ascend.

At the time of publication the author had no position in any of the funds mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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