Last Buyer

QUICK TAKE: Sellers are running the game. Look out below. SELL BIAS. 

Dear Reader:

Recent selling on heavy volume has nearly erased the S&P 500’s gains for August, sending it into its 50-day moving average for a test. 

FOR THE WEEK:

INDEXCLOSECHANGE% CHANGEYTD %
DJIA27665.64-467.67-1.7-3.1
Nasdaq10853.55-459.58-4.121.0
S&P 5003340.97-85.99-2.53.4
Russell 20001497.27-38.03-2.5-10.2

There is no triggering event for the selling. Market tops don’t need a bell to signal, neither do short-term corrections.

The 10% correction is the fastest in history. 

Look for signs the selling is over. Down volume will dry up, leaders will regain their momentum, money will stay in the market, perhaps rotating to different sectors rather than fleeing to cash. 

We always want to be on the side of the majority of the institutions that tend to move the market.

Bull markets end when the last guy puts in his buy order. This, as far as I’m aware, has always been the inexperienced person turned sucker looking to ride the easy train. 

This market has been nothing but an easy train for the new crop of young buyers gambling on their smart phones. That guy who founded Barstool Sports, companies like Nikola and Tesla that catch crazy bids without any earnings to back them are reminiscent of the tech bubble of 2000. 

Don’t be surprised to see a retest of the 3000 level in the S&P. There’s no telling where the bottom is, just as there’s no really telling a top. 

LEADERSHIP:

Biotech tests failure of a 5-year breakout. Many names in the group are posting solid earnings. Long-term outlook here is bullish given the post-pandemic interest in the field. Don’t be surprised to see a shakeout here. 

Gold and Silver remain hot despite the pullback. Forget the macro gamble and just observe the price action here. That simple. 

Still strong: Internet, Semiconductors, Cloud Computing and anything Stay At Home related. 

The Big Five all look like bullish pullbacks on the weekly charts:  Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), and Facebook (FB). 

WEEKLY SECTOR ACTION:

SYMBOLNAME% CHG
XLBMaterials Sector Fund0.98
XLIIndustrial Sector Fund-0.3
XLUUtilities Sector Fund-0.74
XLYConsumer Discretionary Sector Fund-0.74
XLVHealth Care Sector Fund-1.05
XLPConsumer Staples Sector Fund-1.36
XLREReal Estate Sector Fund-1.93
XLFFinancial Sector Fund-2.29
XLCCommunication Services Sector Fund-3.24
XLKTechnology Sector Fund-4.37
XLEEnergy Sector Fund-6.45

Look for individual names later this week. 

Dan

“If you gape after externals, you will inevitably be forced up and down according to the will of your master.”  — Epictetus