STRONG MARCH JOBS REPORT BOOSTS STOCK FUTURES -- SMALL AND MIDCAP STOCKS HAVE ALREADY BROKEN OUT -- LARGE CAPS SHOULD BE NEXT -- EMERGING MARKET BREAKOUTS ARE A PLUS FOR GLOBAL STOCKS
BOND YIELDS JUMP ... This morning's March jobs numbers reported U.S. payrolls jumping by 218,000 which was higher than estimates. In addition, the unemployment rate declined to a two-year low of 8.8%. The result is a jump in stock futures which points to a higher open today. Bond yields are also climbing on the jobs report. Chart 1 shows the 10-Year T-Note Yield hitting a one-month high after clearing its 50-day line earlier in the week. Rising bond yields are bad for bond prices (which trend in the opposite direction of yields) but are generally good for stocks. That's because rising bond yields are symptomatic of a strengthening economy. Arthur Hill has shown the upside breakout in small cap stocks. Chart 2 shows the S&P 400 Mid Cap Index having also exceeded their February high. That greatly increases the odds that large caps will do the same. Developed markets are also getting a lot of help from strong emerging markets.
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Chart 1
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Chart 2
EMERGING MARKET BREAKOUTS ... Tuesday's message showed Korea iShares leading emerging markets higher. Although not shown here, the EWY has since broken out to a new three-year high. Other emerging markets are following suit. Chart 3 shows Emerging Market iShares (EEM) having also broken out to a multi-year high. Chart 4 shows Brazil iShares (EWZ) hitting a two-month high to turn its trend back up again. Chart 4 shows China iShares (FXI) also achieving a bullish breakout. India has been the weakest of the large emerging markets. Chart 6, however, shows the India ETN (INP) having broken a six-month down trendline. All of those charts suggest that the six-month period of emerging market underperformance has ended. That's also a positive sign for developed markets which are following emerging markets higher. The upside breakout in emerging markets, combined with this morning's strong jobs report, should help U.S. stocks start the month of April on a strong note.
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Chart 3
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Chart 4
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Chart 5
