Today marks the end of the first quarter, and what a quarter of action it’s been in the financial markets. We kicked off the year with a continuation of the buying we saw in December, but by mid-January, stocks began retreating. The decline lasted only until the first week of February, however, and since then, stocks have been on a run that’s taken them to new 52-week highs.

So, now that the quarter is over, let’s take a look at our “four horsemen of the markets,” i.e., the four major market indicators that I like to look at to get a sense of where the key action is taking place.

First off, we have the S&P 500 Index (SPX). As you can see, this broad-based measure of the U.S. equity market clearly shows the bullish action we’ve seen in stocks so far this year. Given the big gains we’ve seen in stocks since February, I remain skeptical about how much further we can climb. Right now, the risk in this segment is extremely high, and thus, you should approach buying into this market with extreme caution.

The second horseman to watch is long-term interest rates, i.e., long-term Treasury bond yields (TYX). As you can see via the chart below, yields now have climbed to their highest levels of the year. Although bond yields still are relatively low by historical standards, you have to think that with a debt of some $12 trillion to grapple with, that the big concern on the horizon is further increases in long-term Treasury yields. 

Also on the move higher is the value of the U.S. dollar vs. rival foreign currencies. The chart below of the U.S. Dollar Index shows just how far the greenback has come since falling to its December 2009 lows. Back then, I remember the raging chorus of greenback naysayers suggesting that the dollar was doomed for good. Hey, whenever you hear the masses proclaiming the death of a sector, you can pretty well bet that a reversal is on the horizon. That reversal certainly has taken place in the dollar, thanks in large part to the fiscal problems in Europe.

Our final horseman is the movement in the world’s largest emerging market, China. After falling below both its 50- and 200-day moving averages, the benchmark iShares FTSE/Xinhua 25 (FXI) has started to recover. The move higher in FXI is a definite positive for stocks around the globe, but you must remember that China still has its problems. A brewing housing bubble, possible accusations of currency manipulation by the United States and rising inflation all are serious concerns for Beijing. If we see the Chinese market shrug off these concerns, it could bode very well for international equities going forward.

So, there you have it -- a quick analysis of the four horsemen of the markets. Remember that keeping a watch on these four sectors can really help you get a clear picture of the overall market, and that’s why I recommend all Alert readers spend a little time each week reviewing the action in each of these four market sectors.