Narrow market gets narrower!

We will have our award winning weekend report for you on Sunday but for today, all we have to do is send you last weekend’s report. Remember, on October 2, we thought a good low was in but as the rally continued, the nasty narrowness showed up. Pay attention to the bold as all the poor sector action as well as the narrowness showed itself on cue.

From Sunday November 8th:

As the major indices continue to rally up into resistance and while the Nasdaq 100 moves into new high ground, this remains a very split tape. It is the same type of tape we had before the market tanked in August . Keep that in mind! We don’t have to pick it apart too much for you as it continues to remain what we call a tale of two cities. For starters, the large caps continue to outperform the small caps by the widest margin we have seen in a very long time.

And then you have the underneath the surface action.

On the good side, you have airlines (not all). You now have banks, regional banks and savings & loans. This came about Friday when the market decided long rates are going higher which expand their margins. Other areas in good shape are defense stocks, auto parts retail, internet retail, internet travel, oil refiners and the big cap glamour names in tech/internet. That’s about it which tells you the problem. There is just not enough leadership…and whatever leadership there is are the largest of the large cap that have a major influence on the indices…especially the Nasdaq 100 as names like Google, Amazon and a few others do the job.

Take a gander at this long list of areas that remain in poor shape. We are not making this up.

For starters interest rate sensitive areas like utilities, real estate and housing are all topped or topping out. This is occurring because the bond market (on the long end) looks to have topped out. Then you have gold/ silver, steel, junk bonds, rails, truckers, transports, farm machinery, disk drives, drug stores. hospitals, managed care, media, most commodities including steel, copper and aluminum, hotels, a ton of retail especially department stores, restaurants and just recently food, drugs, beverages, tobacco and household products, insurance, construction equipment and machinery, casino and gaming. Lastly, most oils, while rallying some, and turning a little bit of the corner…are still not leading. This just shows you what a big cap market this is underneath the surface. The good news is that the major indices continue to be strong. They will need to continue to be strong.”

The major indices could not stay strong. Under the weight of the damage, markets have been gagging all week. We’ll pick it apart much more over the weekend. We do have to make note that the retailers are acting like we are going into a recession…something to think about while the imbecilic Fed again teases the markets with their raising of rates a whopping 1/4 point.