Oh, the Disparity!
An extremely lopsided market continues, with the Magnificent Seven hitting another record high, while the Dow Industrials suffers its longest losing streak since the late 1970s.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Extreme lopsided market action continued on Tuesday and was even worse in some respects. The Magnificent Seven MAGS names, led by Tesla TSLA, hit another new high. The group has made nine new all-time highs in the last 12 sessions. On the other hand, the DJIA had its ninth straight day of losses. That is the longest streak since 1978.
The worst part of the action was terrible breadth in the S&P 500 SPY once again. Of the 503 stocks that make up the S&P 500, 380 declined, and just 123 advanced. This is the twelfth session in a row with negative breadth. The Russell 2000 IWM has also been steadily declining and is now testing its 50-day simple moving average.
The disparity in performance between the Magnificent Seven and everything else is mind-boggling, but it is occurring because the only way that investors can produce gains is by chasing the small group of stocks that have relative strength and are trending higher. Valuation and overbought technical conditions are being ignored, but investors tend to stick with what works until it stops working.
It is likely that some of the weak action under the surface was due to concerns that Fed Chair Jerome Powell may strike a hawkish tone when the Fed interest rate decision is announced Wednesday. While the central bank is very likely to cut by a quarter point, there is some worry that Powell will indicate that the Fed has no immediate plans for more cuts.
Market conditions are emotional and messy due to this crazy disparity, so there is a good likelihood that the Fed will produce additional volatility. If nothing else, it should shake up some of the recent patterns.
Have a good evening. I’ll see you Wednesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
