It was a quiet session, especially by 2022 standards, as everyone braced for the fireworks expected today. Volume was extremely light, but market breadth was a major improvement, hinting at the underlying strength that could add an extra oomph to any breakout market move. However, all major indices finished lower (the Russell 2000 eked out yet another gain}. There were more advancers than decliners on the New York Stock Exchange and the NASDAQ Composite.

Market Breadth	NYSE	NASDAQ
Advancers	1,890	2,641
Decliners	1,315	2,041
New Highs	98	140
New Lows	89	162
Up Volume	2.93 billion	2.32 billion
Down Volume	1.45 billion	2.30 billion

There were more new highs than new lows on the NYSE - a good sign but could still be a flash in the pan.

Heat Map

Energy (XLE) stocks rallied on the notion the White House will continue to saber-rattle and cause enough anxiety to push prices even higher. Crude oil also got a lift from scuttlebutt that China might ease out of its Zero Covid-19 program that has probably set its economy back many years. There are no longer estimates of China’s economy overtaking the United States anytime soon.

As Energy (XLE) continues to edge higher, the epic Communication Services (XLC) meltdown continues. However, Meta (META) caught a break when the head of the Federal Communications Commission (FCC) suggested TikTok be banned in the United States.

Great Things in Small Packages

I continue to be impressed with the action in the iShares Russell 2000 ETF (IWM) as small-caps continue to act great.

The S&P 600 Small Cap Index has been acting even better, as it clears the 50-day moving average like a track star and continues to race ahead.

S&P 600 Small Caps

What I like about this index is how much weight Industrials (XLI) have and how little Communication Services (XLC) has – this might be the perfect index in a higher interest rate world with more onshoring.

Portfolio Approach

There are no sector weighting changes to our Hotline Model Portfolio.

Today’s Session

It’s all about the Fed, which these days has sent markets bouncing all over the place (see below).  The thing about this Fed is they are data dependent, but it makes me wonder if that means the data, we all see, or do they do any numbers crunching on their own with their army of PHDs.

There have been lots of leaks from sources supposedly tied to the Fed, and even those have become confusing and contradictory.

Buckle up.

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