Gushing Bullishness on Financial TV, a Sea of Red on Computer Screens
The market divergence is hitting record levels, but it is still underreported.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The headline in the popular press is that the S&P 500 and Nasdaq 100 QQQ continued to make new highs almost every day. What isn’t mentioned is that the majority of stocks declined.
Once again, on Friday, there were new record highs for the Nasdaq 100, while overall breadth was nearly three-to-one negative. Both the DJIA and the Russell 2000 IWM lagged badly this past week, with small-caps breaching support and hitting their lowest level in over a month.
The story of lopsided market action is getting very old, and I’m tired of talking about it, but it is still underreported and has a tremendous impact on anyone who holds a diversified portfolio that includes various market caps. Indexers and those who own nothing other than a few big-cap names are thrilled with this market, but those who don’t are underperforming and feeling frustrated as the folks in the business media don’t even mention what is really happening.
What we have to focus on is being ready for a shift in the action. This divergence is hitting record levels, and there will eventually be some reversion to the mean. There is no way to know how the gap between a few big-cap names and the rest of the market will narrow, but it is inevitable.
My hope is that after years of underperformance, we are now in the last stage of small-cap underperformance and that extreme action will finally trigger a reversal in the trends. The rebalancing in the Russell indexes in the next two weeks may be a potential catalyst for some recovery.
It is a very unusual market, and even more so when I watch the gushing bullishness on financial TV while looking at the sea of red on the screens.
Have a great weekend. I’ll see you on Monday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
