Hidden Stock Market Weakness

The stock market jumped higher on Wednesday. But, the Nasdaq lagged behind on Thursday and Friday. A jump or gap in a market move, as happened on Wednesday, must be ignored. It is the size of the market’s move during the day that is important. The move during the day was much smaller than the gap. This suggests that there is some weakness hidden underneath the covers. This was confirmed by the failure of the Nasdaq to move higher on Thursday and Friday with the rest of the market.

Market sector analysis shows the problem clearly. Overall the market is bullish because the cyclicals group has increased in relative strength by more than 1% since December 1 while the defensive consumer staples group lost 1.7% during the same period. But technology is not firing on all cylinders: bio-technology lost 2.3% and technology hardware lost a large 4.2%. This more than offset the gains in semiconductors and telecommunications. The market performs much better when technology is strong.

Semiconductor Sector Relative Strength: semiconductors Technology Hardware Sector Relative Strengthtechnology

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