Overview
The major indexes continued their slow-motion ascent.
Small stocks lagged again this week.
The US Senate passed an infrastructure bill.
Interest rates rose as long-term bond ETFs bounced off their 50-day average.
Key Question:
The US Senate finally passed infrastructure spending legislation this week. I expect the president will eventually sign some form of it. Can we use this spending to reinforce our portfolios? We focus on a few stocks and ETFs to help you do just that.
Performance Summary
Stocks moved higher in a steady, slow-motion ascent, with large-cap industrials leading the market higher. The new highs in RSP were encouraging, but small-cap stocks lagged again this week.
The bull/bear net balance is bullish, based on our sensitive indicator derived leveraged and inverse ETFs.
We have been observing the breakout in the equal-weight S&P-500 ETF (RSP), and after treading water last week, it rose nicely this week. However, note how it barely budged on Thursday or Friday. In addition, the short-term momentum oscillator strengthened to near 100, so we should expect the trend to continue.
The contrast between the large-cap and small-cap stocks becomes clear when we compare the RSP chart above to the Vanguard Russel 2000 index (VTWO) chart below. We correctly called the bottom in mid-July and hoped that the market would rally strongly. However, the smaller stocks have still not found their footing.
Infrastructure Stocks and ETFs
The term Infrastructure Week had come to denote a period when the administration hyped their infrastructure efforts, usually without any follow-through. A brief history can be found here. Unfortunately, the term has become a bit of a running joke, but you can find some context here and here.
Nucor (NUE) and Albemarle (ALB) are two infrastructure stocks that broke out to new highs this week and have performed well over the past year. The iShares US Infrastructure ETF (IFRA), Global X Funds Global X US Infrastructure Development ETF (PAVE), and FexShares STOXX Global Broad Infrastructure Index Fund (NFRA) are other ways to trade the coming boom in infrastructure. Of course, old favorites such as Caterpillar (CAT) or the Industrial Select Sector SPDR Fund (XLI) are also available. If you like steel stocks, but want to use an ETF instead, then the VanEck Vectors Steel ETF (SLX) is an ETF-based solution. A ranking of these stocks and ETFs by our Relative Performance Meter is shown below.
The enthusiastic rally in Nucor was a vote of confidence by the market that it expects the infrastructure bill to be signed. Our short-term and long-term trend strength oscillators are shown below the daily prices in the chart below. Nucor has high RPM and high technical trend strength, so it is worth paying attention to.
Wrap-up
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Thank you for spending some time with me.
Disclaimer
And now for some housekeeping. This publication is for “edutainment,” education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.