The major indices posted a seven-day winning streak following the worst day in 8 months; once again proving that the bull market is alive and well. Domestic stocks not only erased the correction, but also overcame the broad weakness in international markets, and kept on creeping higher throughout the week. European equities were hit by the tragic Manchester attack, while Asian markets became volatile following the downgrade of China by Moody’s. Despite the robust performance of the indices, not everything is rosy on Wall Street, as small caps continue to lag the broader market, which might indicate some weakness down the road.

The few economic releases that came out last week were a tad better than previous reports, which helped in easing growth-related fears. That said, the miss in durable goods orders still points to weakness in industrial activity, and the housing market is also mixed at best, with new home sales disappointing yet again. The prelim GDP reading was well above the consensus estimate, despite a large draw-down in inventories, and that might mean that the next rate hike in June is a sealed deal. The Fed minutes confirmed the FOMC’s previous tightening schedule, but the strength in Treasuries suggests that investors are expecting a rough ride in the latter half of the year.

Technicals are looking great, at least with respect to the major indices, as the relentless rally cleared all doubts about the direction of the underlying trend. The Nasdaq, the Dow, and the S&P 500 are all back above their 50-day moving averages, while being way above their 200-day averages. On another positive note, all three benchmarks are trading near their all-time high, and only the Dow failed to post an actual new high during the week. The Russell 2000 is still struggling with its short-term indicator, with the week-long advance only carrying the small cap index just above the crucial measure. The Volatility Index (VIX) crashed thanks to the strong rally, as it moved back below the 10 level, as traders quickly removed their hedges.

The negative divergence in market internals is still apparent, despite the obvious improvements, as some of the key measures are not in line with the all-time highs in the major indices. The Advance/Decline line is among the bright spots, as it surged to a new high together with the market. Advancing issues outnumbered declining stocks by a 4-to-1 ratio on the NYSE and by a 5-to-1 ratio on the Nasdaq. The average number of new 52-week highs bounced back strongly on both exchanges, rising to 155 on the NYSE, and 146 on the Nasdaq. The number of new lows declined slightly in the meantime, edging lower to 53 on the NYSE, and 60 on the Nasdaq. The ratio of stocks above their 200-day moving average declined alarmingly amid the rally in the indices, as small caps pushed the indicator below 63%.

Short interest is at a record low once again, and the most-shorted stocks even outperformed the broader market last week. Fresh software IPO Trade Desk (TTD) isn’t letting early shorts go, as the stock is glued to its recent highs, while the short interest is sky high at 54%. The short squeeze in Spark Energy (SPKE) continued last week, despite the dip in the price of oil, as the stock jumped by another 10%, with the short interest still at 48%. Digital Realty (DLR) also added to its recent gains, breaking out to a new all-time high. It jumped to second place on the list with a days-to-cover ratio (DTC) of 16. Drug wholesaler Amerisource Bergen (ABC) is showing strength as well, hitting a new 3-month high last week, while sporting a DTC ratio of 11.

As Trump’s domestic troubles were eclipsed by his international trip, traders turned to the Fed for fresh guidance before June’s crucial rate hike decision. With no major surprises coming from the economic front, stocks seem to have returned to their long-term advancing trend. That said, Friday’s employment report might have the potential to change the short-term direction, especially given the negative seasonality and the weakness in small caps. The CB Consumer Confidence Index and the ISM manufacturing PMI will also come out on Tuesday and Thursday, respectively. The Gorilla hopes that the resilience that stocks showed in the past two weeks is here to stay, and the month will end with more all-time highs. Stay tuned for a busy week!