Small Cap Relative Strength Index Breaks Key Long-Term Support Levels

Small-cap stocks are in freefall relative to large-caps

Highlights

• Small-cap stocks are in freefall relative to large-caps

• Consumer will be in focus with tomorrow's retail sales data

• Breadth, sentiment and valuations in the equity market signal caution ahead

• Fed’s dot-plot does not pass the smell test

While We Were Sleeping

It is a highly uneven start to the week. U.S. futures are mixed, with Dow futures flat but Nasdaq futures squarely in the green (two important things are missing in this rally in the broad market to new highs: volume and breadth — more on this below). The Euro Stoxx 50 has mustered up a +0.8% rally here in the early going — even as France tiptoes towards a political and fiscal crisis (it turns out that Macron is more threatened by the far-left alliance than he is from Marine Le Pen). The next in line for a round of political upheaval is the U.K., which goes to the polls on July 4th — the polls point to an overwhelming victory for the Labour Party. But Asia was nothing more than a sea of red: Japan’s Nikkei 225 (-1.8%), Thailand (-0.9%), China’s Shanghai Composite (-0.6%), and Korea (-0.5%). Hong Kong and Taiwan were both flat. All in, Asia Pac sold off -0.8% and posted its third straight losing session.

Bond markets are quiet, though with a mild upward tilt (but not before the 10-year Treasury note yield sliced below all of its major trendlines) — with Minneapolis FRB President Neel Kashkari stating yesterday on a CBS interview (Face the Nation) that he is not prepared to cut rates before December (then again, he is not currently a FOMC voting member). There is very little action in the FX space, with the DXY dollar index stuck at 105.5 but only after spiking above all the major trendlines in recent sessions. Bitcoin (-0.5% to $66,104) and gold (-0.6% to $2,318 per ounce) are lower in the overnight trade, but Brent crude is up +0.4% to $82.9 per barrel. All market quotes are time-stamped to 4:30 a.m. ET.