Divergent Developments

In the current market environment you would not expect growth oriented companies to lead the market, but that is exactly what happened last week. And there we other divergences as well. It will take more time for this development to offer a clearer picture of what future direction the market may take, but along with other underlying characteristics, I chalk it up to a positive development.

Let’s start off with growth oriented stocks which outperformed broad US indexes. I first noted in IBD's Big Picture the IBD 100 turned in a weekly performance of 2.7% while the S&P 500 was down -1.07%. Looking into the situation further, all of the following growth oriented ETFs outperformed the S&P 500 last week.

Powershares DWA Technical Leaders
Powershares Value Line Timelines Select
Powershares Aggressive Growth Portfolio
First Trust IPOX-100

Several small-cap growth indexes also led the market.

In general volume was heavier early in the week where most of the gains were made and then tapered off as the gains were consolidated on Thursday and Friday. Overall, however, in terms of price action most U.S. broad indexes have not been able to break resistance levels on the upside.

There was even more of a divergence globally with several European countries turning in strong performances for the week followed by Japan. In addition, International Small Cap was up 4.77% for the week and has trended higher since hitting lows in January (unlike the S&P 500 which hit lows in March). Compared with the U.S., trading action in leading countries has exhibited more of a slightly upward bias since the bottom in January.

In terms of individual countries, China turned in a strong performance with the Powershares Golden Dragon Halter index up 9.93% for the week. India followed closely behind. If the price levels hold, China may have found a bottom.

In terms of regional performance, Asia was the strongest followed by Europe and Latin America.
In the fixed income market we saw a bit of a rally in the Powershares High Yield Corporate Bond Portfolio up 1.24% for the week followed by the SPDR Lehman International Treasury Bond Fund, up 1.13%.

We saw a broad recovery in commodities during the week with the Market Vectors Coal taking the top prize, up 10.92% followed by gains in base metals, natural gas, silver and metals & mining. Broad commodities as represented by the Powershares DB Commodity Index were up 4.56%. If you don't understand the role commodities can play in a portfolio, it is worth understanding. Besides what commodities can do for your IRA, owning a commodity index has the potential to make going to the gas station or grocery store a less painful pocketbook experience.

In terms of domestic industry performance, Oil & Gas related industries turned in 7 of the 10 top spots for the week. The other top three were represented by the metal & miners as well as Agribusiness.

The market experienced some positive developments during the week which may turn out to help confirm strength in the rally started on March 11th but so far we seem to be stuck in a trading range.

At present, portfolios at Dightman Capital are underweight stocks, overweight cash and inflation protected securities, and moving to an overweight in alterntive investments including commodities.