The Dorsey Wright & Associates (DWA) current technical analysis shows US stocks and Bonds as the two strongest major asset classes followed by Currencies, International stocks, and Commodities. Within the US stock asset class, middle capitalization stocks are favored, growth is favored over value, and equal-weighted indexes are favored over capitalization-weighted indexes. On a relative strength basis, Consumer Discretionary, Information Technology, Health Care, and Real Estate are the strongest major economic sectors. Energy, Telecom, and Materials are the weakest. Within the Bond major asset category, US Treasuries and International bonds are favored.
Next week will be relatively quiet with regards to major economic data reports. The International Trade Balance report will be issued Wednesday morning and with the recent drop in oil prices, this number is expected to improve. The Jobless Claims report will be announced as it always is on Thursday morning. Consensus calls for 375,000 first time claims matching recent levels. On Friday morning the Producer Price Index will be released with an expectation of a drop of 0.4% thanks primarily due to a fall in energy prices. Falling prices are certainly a welcome reprieve.
Finally, Monday kicks off earnings season when corporations report their second quarter earnings. In addition to actual earnings, investors will be parsing corporate statements for their outlook on the rest of 2012.