Monday’s stock market drop wasn’t bearish; subsequently the market rose

The stock market suffered a big drop on Monday. At first glance it was bearish because the range was big and it closed at the day’s low. But, if it had been bearish, the market would have continued its drop and eventually plunge through the March lows. Instead, the market moved higher. But the weakness caused by the Monday drop is pervasive.

 

The stock market turning defensive is mirrored by the Utility Sector rising a very high 5%. Another defensive sector, Food and Beverage, rose 0.6% after being down -1.1%. The Technology Group was hit the hardest: the Semiconductor, Technology Hardware and Electronics sectors all lost big. The stock market performs much better when Technology and Cyclical Groups are strong.  Instead, in my latest sector report, the Technology and Cyclical groups both lost strength.

 

Here’s the relative strength chart of the Semiconductor sector:
semiconductors

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