There Are Two Sides to This Market's Story
One is all about 'stall tactics,' the other is on fire — but the two are related. Here's what's been really happening with small-caps, tech, the S&P, metals and energy.
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I want to talk numbers. I know your eyes will glaze over but I can’t help myself so please bear with me.
Let’s begin with the small-caps. Do you know that the iShares Russell 2000 ETF IWM closed in the final days of 2023 at $202 and today it stands at $205? That’s three points in just over three months. I do hope they improve but for all of you seasonality fans, we are about to enter the worst period for small-caps. I have never been a fan of seasonality but there are many who are.
Surely it’s been a stand-up year for mega-cap tech then, right? Well, on February 9 the QQQs (Invesco QQQ Trust) closed at $437. Today the QQQs are at $440. That’s another three-point move, only this one is in two months. Maybe we should rephrase that "stand up year" to January was a great month for mega-cap tech.
Oh but the S&P 500 has been terrific, hasn’t it? It has. But on March 12 it closed at 5175 and today it stands at 5202, which means it is now working on a month of sideways.
Do you know what has been absolutely on fire? You do. Metals, mining and energy. Do you know their weighting in the indexes is so small that a 15% move in gold since early March hasn’t helped any of the indexes above?
Silver is up nearly 25% in that same six weeks. Again, none of the major indexes have been helped much by this move.
Energy is up 13% (using the Energy Select SPDR Fund XLE) since early March, when the S&P stalled out. I feel this just goes to prove my point: these are not the index movers.
In other words, there really are two sides to this story. There is the stall out in tech and mega-cap tech specifically. There is the stall out in small-caps since the calendar turned to 2024. There is the stall out in the S&P in the last month. And then there is the run in commodities. I think we have to say that the two are related.
As far as the commodity moves, silver’s DSI already tagged 91 last week. It currently stands at 88. The five-day moving average of its DSI is at 88 as well. Gold has not seen a reading over 90, although it got close with an 89 once. Its five-day moving average is now 87. Both are very high.
Oil has seen its high reading at 88 and its five-day reading is now 85. That also edges on the high side. I am not bearish on energy but when I look at the ratio of the VanEck Oil Services ETF OIH (the higher-beta energy names) relative to XLE, I see that the relationship peaked (for now) two weeks ago. That typically signals it is time for a breather.
Aside from all of that, the solar eclipse was the most exciting aspect of Monday. You see the lines all held. That means the uptrend lines that haven’t been broken held and the ones that have already broken did not get recaptured.
Be sure to read Top Stocks where I discuss, among other things, PepsiCo PEP, Wayfair W and Sea Ltd. SE.
