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Futures down…NASDAQ worse than DOW. Foreign markets pulling back after good week of gains.
The thought process has not changed from anything we have been seeing. Two weeks ago, we wrote the report about “changing of the guard” in the market..and since, this is exactly what has happened. Relative strength in the market has been turned on its head. What was lagging is now leading and what was leading is now lagging. How long this lasts is anyone’s guess. In that report, we started seeing money flows out of growth and into low beta. Most growth names have now put in near term tops, if not more while the DOW now leads the way. Friday was just another day as the DOW was up 86 while the NASDAQ was down 41. For the week, the DOW was up 588 points, a 2.25% gain but the S&P was only up 24, a .85% gain. The NASDAQ, NDX and the RUSSELL were all down.  With the DOW up that 588, important names like AMAZON and APPLE were both down almost 3%. AMAZON is on the verge of breaking the 50 day. A break would be negative for growth is this is the leading name. It is important to recognize growth has had its way for quite a while becoming a bigger and bigger percentage of the S&P while value continued to shrink.
The other part of our “changing of the guard” theme is the rest of the world putting in hopefully, a decent low. This is still not 100% sure and as of this second is a counter-trend rally in an overall bearish trend. Countries like CHINA, RUSSIA, BRAZIL, EMERGING MARKETS are already overbought from the recent move so suspect some retesting here. We will watch the retest closely.
We have been saying if we can get past September and October earnings that we could get a good end of year. But so far, rallies have been narrow and disjointed. A sustained move needs to have broad based participation…which ain’t happening just yet. We also have to make note that oil prices are breaking out of range. Not sure it is good news for markets as this is a huge “tax” on consumers and business.
Lastly, we have been inundated with a news report highlighting some “experts” saying a crash is overdue as well as a deep recession, if not a depression. We have no interest in arguing as anything is possible, especially with the massive debt and deficits, both here and around the globe. Of course, all this being enabled by maniacal central banks. We just wanted to make sure you knew that these “experts” have been calling for doom for about 16,000 DOW points yet somehow get front and center in an article and are still called “experts”. In case you did not know, everything about the market is timing. Broken clocks are right twice each day.