There is still diversion between the Nasdaq versus the Dow and S&P

The diversion between the Nasdaq 100, on the one hand, and the S&P500 and DOW continued last week. Will the Nasdaq catch up to the other two indexes or will the reverse happen? The weakness in technology is worrisome, especially concerning the technology hardware sector. In the past, stocks moved substantially higher with technology companies leading the way.

The overall graph of the cyclicals sector versus consumer staples shows cyclicals way ahead; in other words: bullish. The individual stock market sectors give us evidence of an improving economy. Consumer durables and  retail zoomed higher in relative strength while the transportation sector continued a moderate advance from past months. Together this shows both small and large ticket items being sold and shipped.

The basic materials sector was another big loser in January. This suggests deflation. Many in the media have warned about the dangers of inflation due to the record-breaking dollar-printing “stimulus” of the Federal Reserve. But wages and real estate are stagnant at best and there is rampant unemployment. While some commodities have moved higher, are there any market sectors that have the power to raise prices?

Here’s the consumer durables (relative strength) chart:

consumer_durables

Here’s the technology hardware sector (relative strength) chart:

technology

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