The relative performance chart below, which I constructed on the
fantastic and free StockCharts.com, describes the market landscape
of the past month in several interesting ways.
I will break it down after you take a look, but note that the blue
bar next to AAPL is the ETF TLT, a proxy for the US Treasury long
bond, and "Cyclicals" is the Consumer Discretionary ETF, XL Y. And
I only picked AAPL as the only single stock because I think it is
representative of where big money can hide and ride out a storm.
What stands out are defensive sectors like Utilities and Consumer
Staples leading, with the laggard Energy finally catching some
money flow into summer and geopolitical worries. Obviously the
growth areas lag, represented by small caps, the Nasdaq, and
I included the NYSE because it was one of the better looking charts
just like the S&P 500 and the Dow. But that is just part of the
same theme of the flight to safety in big caps.
About ten days ago, I said this market would show its hand in the
next "3-7 sessions" about whether it could bust out to new highs,
with the big caps dragging the growth indexes along for the ride.
I thought we got an all-clear sign after the market didn't fall
following an awful GDP print and another FOMC taper notch. Instead
what we got was more muted action after a great jobs number and
revisions that took the "worst winter ever" to an NFP average of
214k jobs vs last year's 194k.
And if there's any doubt about how long the flight to safety by
money managers has been going on, here's the 3 month view of the
same chart. Except for bonds playing catch-up a lot recently, these
trends have been in force for some time.
This is where money goes when institutions are in "distribution"
mode and getting out of growth stocks. It's not a pretty picture
and seems to argue for more corrective action before their risk
And while it is typical of what happens at the end of the "best six
months" (Nov-April), I thought we would see a shift back to
"risk-on" investing this week during another good enough earnings
I actually thought it could be "Buy in May" this year. But these
persistant signs are troubling, especially when there was little
spark for them to reverse after that jobs number.
What say you? Is the writing on the wall above likely to reverse as
money managers find bargains in growth, or is the path of least
resistance still lower until the bargains get better?
APPLE INC (AAPL): Free Stock Analysis Report
ISHARS-R 2000 (IWM): ETF Research Reports
ISHARS-20+YTB (TLT): ETF Research Reports
SPDR-UTIL SELS (XLU): ETF Research Reports
EXXON MOBIL CRP (XOM): Free Stock Analysis
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