And Just Like That, The Bond Market Sell-Off Doesn't Matter (Technically Speaking For 3/1)
Summary
- The YTD performance of small-caps is very strong.
- This week's employment report is very important for the market.
- The markets started the week on a strong note.
Let's start this week by looking at the year-to-date performance of the major indexes and market sectors:
After a mere two months, smaller-cap indexes have performed admirably. Micro-caps have rallied 21%, small-caps are up 11.25%, and mid-caps have risen 8.44%. Larger-cap indexes had increased far less while treasuries have sold off strongly.
At this point, we should probably put the energy sector ETF into its own table, as it will either be at the top or bottom of the table with a disproportionately large increase or sell-off. Start at the bottom: three defensive sectors occupy the bottom three slots, which indicates just how aggressive traders have been. The recent sell-offs have greatly reduced the gains in other sectors.
This week, there are a few key economic releases. The most important is Friday's jobs market report. Keep your eye out for two key details. First, the pace of job creation, which has slowed noticeably in the last few months:
Second, the labor force participation rate, which has also slowed during the last few months:
Both of these numbers need to start increasing for at least several months to consider the jobs market as on the road to recovery. The Institute of Supply Management will release its latest manufacturing and service sector surveys this week. Both are very strong:
The manufacturing index is near one of its highest levels in the last 15 years, as is... 
... the service sector index.
Finally, keep an eye on Thursday's initial unemployment claims data, which meaningfully decreased last week for the first time in months. A second decrease would indicate further labor market healing.
Congressional Democrats are dropping the minimum wage complications from the stimulus bill:
Senate Democrats are jettisoning a proposal to use the tax code to penalize corporations that don't raise the minimum wage for their lowest-paid workers in an effort to keep President Joe Biden's broader stimulus plan on track for quick passage, according to two people familiar with the matter.
The latest market rally has been partially predicated on the idea that stimulus was coming. This move will add support to the market.
Let's take a look at today's performance tables:
After selling off during the last few weeks, smaller-caps rallied strongly today, with micros and small-caps advancing 4.8% and 3.58%, respectively. Thanks to a strong tech sector (see below), the QQQ rallied 3%. Larger-caps also had solid days while the treasury market continued to sell-off.
All sectors were higher. The strong performance from tech and financials explains the solid moves in the QQQ and IWM, respectively. Also supporting the QQQ was the 2.65% rally in communication services. Notice that defensive sectors are at the bottom of the table.
Let's start with today's charts:
Generally, this was a two-stage rally; prices gained strongly at the open, consolidated in the late morning and early afternoon, picking up steam into the close. The DIA (lower left) was a bit weaker overall. But all things considered, these are great charts on which to open the week.
The treasury market may be settling down:
TLT 3-Month
On Friday, the TLT rallied into the 10-day EMA. Today the ETF was a bit lower but on much slower volume.
IEF 3-Month
The IEF was also lower today. However, like the TLT, the IEF also had much lower volume.
Overall, the equity indexes are consolidating. 
IWM 3-Month
The IWM continues to move in a modestly downward sloping channel that is consolidating gains. The channel started in the second week of February and is ongoing.
QQQ 3-Month
The QQQ is the worst-looking chart. Prices are still below the trend line connect lows from December and January. 
SPY 3-Month
The SPY bounced into a downward-sloping trend line today.
I still think the equity markets are bond market-dependent right now. If bonds continue to steady, equities probably will as well. But if the bond market sell-off continues, I think further volatility is likely.
This article was written by
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