The market melt-up continues.

Industrials (XLI) led the S&P 500 yesterday, followed closely by Materials (XLB) and Health Care (XLV). Technology (XLK) and Communication Services (XLC) weaknesses stand out like sore thumbs.

Financials (XLF) fared well, but within the sector, banks surged.

Undoubtedly, this leg of the rally has been ‘emphatic,’ but it's okay to question its durability.

Tiny Boxes

The S&P 500 finished higher, although well behind other major equity indices. That’s because the big boxes and rectangles in the S&P 500 were all red. It took a lot of tiny green boxes to counter those names, but this would always be the true test of the market’s “strength.”

Market Breadth

The internals for the New York Stock Exchange (NYSE) and the NASDAQ Composite were fabulous yesterday. Both saw more than 400 new highs and very few new lows. Advancers dwarfed decliners, and the up volume was four times down on the NYSE and three times on the NASDAQ.

Market Breadth	NYSE	NASDAQ
Advancers	2,272	3,284
Decliners	563	957
New Highs	415	485
New Lows	4	32
Up Volume	2.74 billion	4.11 billion
Down Volume	507.82 million	1.09 billion

High Hopes

The small-cap run continues and may soon become the stuff of legends. The five-day outperformance over the S&P 500 is among the highest ever.

The subplot is how quickly names are rallying. It’s a lesson on holding oversold stocks that you know will eventually rebound – sometimes much faster than you could imagine.

Today’s Session

The big news this morning is that the Biden administration is considering using an extremely stringent export control measure called the Foreign Direct Product Rule (FDRP) to restrict China's access to high-end chipmaking tools.

The news is hammering semiconductors in general and ASML in particular.

The selling of high flyers could extend the rally into small caps and non-tech names.

Yesterday, the index closed up 4.42 standard deviations above its 50-day moving average. No other primary US index has ever achieved such a feat, which is even more remarkable considering the Dow goes back to 1900, the S&P 500 to 1928, and the NASDAQ to 1971.

Carrying the Load Without Growth Sectors

Three sectors have surged to new highs, which bodes well. Remember, new highs beget new highs, especially with rising volume (Financials and Industrials).

XLF (Financials), XLI (Industrial), and XLV (Healthcare) represent 201 stocks, or 40% of the index, with much more usage.

Conversely, volume has dried considerably for the overall market, which might reflect increased angst (I'm not sure what anyone could be worried about).

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