This is an excerpt from John Blank's most recent Market Strategy Report. To access the entire PDF, click here. May shows a U.S. stock market in a fair-value stall -- fully valued at the top end of a trading range. Beneath the S&P 500 surface, the low bar for Q1 EPS seemed to lead to a lot of upgrades, as did the big turn in steel and iron ore prices, and commodity prices more generally. May has produced a major shift in sector leaders. Up from the bottom came the Industrials and Materials sectors. I see numerous shifts in Industrial industries and Materials industries across the board. This is worth investigating. Health Care came back to its usual leadership role. Energy, sensing a WTI and Brent oil price stall, stayed Market Weight. The loser sectors, and they weren’t really in the tank, were Utilities and Financials. A. 3 U.S. Reasons to Remain Bullish on Stocks #1 Monthly Nonfarm U.S. Payrolls, Unemployment Rate Stay Bullish As long as the U.S. nonfarm workforce keeps building up, the U.S. stock market rises. #2 Three Conditions for a Bear Market Not Met Extreme consumer price deflation is the first of these 3 conditions. Global markets have come close to deflation, but not the USA. Second, there can be extreme stock overvaluation. However, the S&P500 need to trade at 25 times earnings, not the 17 it is trading at right now. Finally, the yield curve can invert. The current yield curve is flat, but positive. It is not likely to become inverted in the next 12 to 18 months. #3 Fixed Income Cupboard: Totally Bare The fixed income cupboard is totally barren. Across advanced countries, central banks keep policy rates close to zero. The U.S. Fed has announced a plan to slightly raise rates. $6 trillion in sovereign bonds have negative rates. B. 3 Non-U.S. Reasons to Remain Bullish on Stocks #1 As Oil Prices Rally, Energy EPS Rises and High Yield Spreads Come In This FRED (Federal Reserve of St. Louis) chart shows the BofA Merrill Lynch U.S. High Yield Bond Option-Adjusted Credit Spread. BofA Merrill Lynch U.S. High-Yield Option-Adjusted Credit Spread This chart shows a 9.0% high yield (HY) credit spread was reached early in 2016 when the WTI oil price collapsed to $26 a barrel. HY credit spreads tied to companies in the Oil and Materials sectors blew out. Then, they rallied up until now, in early May. Caution! Note the periods of reversal, where high yield credit spreads move higher again. HY compression is not a smooth process of adjustment, month-to-month. #2 Risk-On! International Stocks, Small-Caps Can Keep Rallying Once HY spreads come in, there should be a deeper ‘risk-on’ play at the very top of the risk securities ladder. In short, when the Russell 2000 rallies emerging markets will be rallying. #3 Turn Up in S&P 500 Revenue Growth May Depend on China China is buying heavy equipment and sparking a big rally in iron ore prices. In their latest Q1 conference call, Caterpillar Inc. said it is encouraged by improvement in demand for heavy machinery in China. "Infrastructure projects are starting, and for the first time in a few years, we're seeing stronger demand from China." -- Caterpillar CFO Brad Halverson. C. Zacks May Sector/Industry/Company Telescope Overall, I smell a positive change in the wind in May ranks. (1) Health Care moved back up to Very Attractive, where it is typically. It is Medical Care in the clear lead, with Drug and Medical Products tied. Zacks Rank #1 (Strong Buy): Air Methods Corp (AIRM) Air Methods Corporation provides air medical emergency transport services and systems throughout North America. The Air Medical Service Division offers their client’s helicopters and airplanes equipped with medical interiors for flights from the scene of an accident or general hospital to a trauma center. (2) Industrials made a huge upward shift to Very Attractive from Very Unattractive. Business Products, Construction-Building Services, and Machinery-Electrical led the way. Industrial Products-Services, Airlines, Railroads and Aerospace & Defense, and Machinery looked good too. Zacks Rank #1: Comfort Systems (FIX) Comfort Systems USA, Inc. is a national provider of comprehensive heating, ventilation and air conditioning installation, maintenance, and repair and replacement services. They operate primarily in the commercial and industrial HVAC markets. (3) Materials lifted to Very Attractive. Building Products-Construction, Metals Non-Ferrous, and Chemicals were the leaders. Containers & Glass and Paper also looked good. Zacks Rank #1: Boise Cascade (BCC) Boise Cascade Company operates as a wood products manufacturer and building materials distributor. The Company manufactures engineered wood products, plywood, lumber and particleboard and distributes wood products, such as decking, EWP, lumber, panel, particleboard, and MDF products. (4) Consumer Staples maintained its Attractive rating from last month. Tobacco, Soaps & Cosmetics, and Other Misc. Staples stood out as industry leaders. (5) Info Tech moved up to Attractive. Misc. Tech led the way again. Software Services and Electronics looked solid. The Semis were a Market call. (6) Telcos rose to Attractive. The leader is Utility-Telephone. (7) Consumer Discretionary stayed at Market Weight. Home Furnishing-Appliance is best, with Other-Cons. Discretionary a close second. (8) Energy stayed a Market Weight. Coal and Energy-Alternates were the bright spots again. Integrated got a Market Weight. Oil & Gas Drilling remained in the dumps again. (9) Financials were Unattractive. The Market industries were REITs and Insurance. Investment Funds looked terrible. (10) Utilities fell to Unattractive. This is an excerpt from John Blank's most recent Market Strategy Report. To access the entire PDF, click here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AIR METHODS CRP (AIRM): Free Stock Analysis Report COMFORT SYSTEMS (FIX): Free Stock Analysis Report BOISE CASCADE (BCC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research