What do you get when you add up Twitter, Yelp, and Weibo?
Answer: Deflation. That's the latest joke as former high-flying
tech stocks fizzle, while Treasury bonds sizzle.
Over the past several weeks we've seen a major shift in the
market's psychology away from risky equity bets. And as these high
risk/high beta equity segments get clobbered, bond prices continue
The May 2014 issue of the
Profit Strategy Newsletter
"In the small-cap arena, around 40% of stocks in the iShares
Small Cap Russell 2000 (NYSEARCA:IWM) are down 20% or more from
their 52-week high. In previous market cycles, hot performers
were typically the last ones to be taken out, following the rest
of the stock market lower. In this cycle, it appears the hot
performers have been the first ones to be dragged down. It's an
obvious red flag."
Is the punishing in tech (NYSEARCA:FDN) and social media
(NYSEARCA:SOCL) stocks a prelude for trouble ahead in the broader
Valuation Geeks Miscalculate Again!
Only two times during the past 35-years has the NYSE Composite
Index (NYSEARCA:NYC) been at all-time highs while the Russell 2000
small cap index simultaneously cut below its 200-day moving
average. "Those two times were in 1999 and 2007," observes Chris
Kimble, proprietor at Kimble Charting Solutions. "Now it's
occurring for the third time in three decades." Will this time be
Meanwhile, the narrative of outperformance by Treasury bonds
over U.S. stocks (NYSEARCA:IVV) continues to play out.
The chart above shows that daily 2x (NYSEARCA:UBT) and 3x
leveraged long-term Treasury bond funds (NYSEARCA:TMF) have smoked
the S&P 500 with YTD gains from 23% to 35%. The unleveraged
iShares 20+ Yr Treasury Bond Fund (NYSEARCA:TLT) has gained over
11% while the S&P is up around 2%.
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