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Market Overview: Strong Bull Trend Confirmed

Major U.S. stock price indexes are confirming a strong bull market trend. The S&P 500 (SPY), the NASDAQ 100 (QQQ), Small-Cap (IWM), and Mid-Cap (MDY) ETFs all rose to new highs last week.

Sector and Market Rotation

The large-cap S&P 500 ETF (SPY) outperformed the equal-weight ETF (RSP) since 3/31/26, confirming that the market currently prefers mega-cap leadership. Longer term, SPY has outperformed RSP since 2015—a major trend.

The Technology ETF (XLK, 175.52) has strongly outperformed all other sectors, up 38% over the past 6 weeks since its low of 126.68 on 3/30/26. Earnings reports have exceeded expectations, and fundamental analysts remain bullish. The pessimism surrounding AI from November through March has reversed, placing significant pressure on short sellers.

In contrast, the Energy Sector SPDR (XLE, 55.70) price crossed back below its 50-day SMA now at 57.93. XLE appears to be struggling to establish a direction this month as it trades above its low of 53.41 on 4/17/2026 but below its peak of 63.46 on 3/30/2026. Although short-term momentum has turned back down again, the next major move likely depends on global oil supply news and unpredictable geopolitical developments.

Health Care, Financial, Retail, Utilities, and Consumer Discretionary sectors may continue to underperform. The University of Michigan Preliminary Consumer Sentiment Survey for May fell to a record low as consumers worry about the cost of living outstripping income growth.

International equities are giving mixed signals. The Emerging Markets ETF (EEM) soared to a new all-time high on 5/8/26, confirming a major bullish trend. However, the EAFE ETF (EFA) is lagging and remains below its 2/27/26 peak at 105.94. EEM has outperformed EFA since June 2025, and current trends suggest EEM outperformance will continue.

Finally, the China Large-Cap ETF (FXI) is badly underperforming EEM and EFA. FXI also has underperformed the S&P 500 for 19 years since 2007--a major long-term trend. Technical conditions continue to point to persistent underperformance by FXI, so exposure should be avoided.

Currencies, Commodities, and Fixed Income

The U.S. Dollar Index ETF (UUP, 27.34) declined again last week. UUP remains below its 50-day and 200-day SMAs (both at 27.54), indicating bearish momentum. The dollar has remained in a major downtrend for more than 3 years since its peak of 30.76 on 9/27/2022.

Precious and industrial metals have been choppy since the blow-off tops on 1/29/2026. Copper (CPER) price confirmed upside momentum on Friday 5/8/26, as it rose to its highest price since 1/29/26. CPER is in strong position above its rising 50-day and 200-day SMAs. Conversely, Silver (SLV), Gold (GLD), and Gold Miners (GDX) appear to be stuck in trading ranges since 3/26/26. As a group, metals have continued to underperform the major stock price indexes since 1/29/26 and clearly are not where the action is now.

Energy markets pulled back last week. WTI Crude Oil (CLM26, 94.69) and Oil ETF (USO, 133.59) both remain in strong positions above their 50-day SMAs and 200-day SMAs, but these uptrends may depend on news about the global oil supply.

U.S. fixed income remains risky. This month, the Long Bond ETF (TLT) and the U.S. Note ETF (IEF) fell to 10-month lows, confirming bear market trends. In March and April, TLT, IEF, and the U.S. Aggregate Bond ETF (AGG) triggered "death cross" sell signals, when their 50-day SMAs crossed below their 200-day SMAs. The technical structure suggests continuing downside risk and underperformance.

Momentum and Breadth for the U.S. stock market remain bullish.

Of 38 major markets we track each week:

• 82% are above their 50-day Simple Moving Averages (SMAs), up from 79% a week ago.
• 79% are above their 200-day SMAs, unchanged.
• 76% maintain a bullish long-term configuration (50-day SMA above 200-day SMA), unchanged.

Within the S&P 500, 50.8% of stocks trade above their 50-day SMAs (down from 54.8% a week ago), and 54.8% are above their 200-day SMAs (down from 57.8%).

The Cumulative Daily Advance–Decline Line (A/D Line) rose to a new all-time high on Wednesday 5/6/26, confirming the strength of the major price indexes.

Net New Highs have been consistently bullish every day since 4/6/26. Readings above zero for new highs minus new lows are bullish.

Sentiment Indicators show moderate optimism.

The AAII Bulls/Bears survey recorded 38.30% bullish versus 33.00% bearish. The Put/Call Ratio fell to a below-average 0.46, down from a peak of 0.90 in March, reflecting a marked move from defensive positioning toward greater risk appetite. The VIX Index fell to a below-average 16.18, its lowest level in 3 months and down from a peak of 31.65 on 3/27/26 (when it was more than two standard deviations above its 10-year mean of 18.79). The CNN Investor Sentiment Index indicates moderately optimistic Greed at 67, down from 71 on 4/20/2026. In March, it ranged from 14 to 18, placing it deep in the Extreme Fear zone, a condition that has historically been bullish. Although sentiment is optimistic, it has not yet reached extreme levels that might justify a contrarian bearish view. Doubt remains, particularly in the perpetually pessimistic mainstream media.

See The Colby Global Markets Report (click here) for our complete analysis of global markets and specific investment rankings.

A strategy emphasizing both capital preservation and return on investment appears most rational and prudent at this time.

Every day, we measure and weigh objective technical and quantitative data in order to judge the Reward/Risk probabilities of trend continuation or reversal. Our goal is to protect your assets from major risks while capitalizing on an improving investment outlook. We always put our clients' best interests first.

Consider exploring our professional fiduciary asset management services to protect and grow your wealth. We are happy to discuss your goals and concerns and answer your questions.

For a free consultation, contact: Bill Anderson Phone: 646-652-6879
Email: anderson@colbyassetmanagement.com

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