There are still waves of selling in the stock market

The DOW, S&P and Nasdaq Composite all lost more than 1% in August; the S&P lost the most at 2.5%. The stock market is still moving sideways. It is well above its August 24 lows and its September 29 low. However, it is also well below its highs. Every time it moves up to those highs and fails to move higher, makes it harder for it to do so the next time.

My chart dividing the cyclicals by the consumer staples shows the cyclicals gaining over the last few days. This is a divergence with both the stock market and the overall table of individual stock market sectors. All four stock sectors groups lost strength in September. The Cyclicals were the weakest of the four but most of the weakness came from the Basic Materials, Energy and Machines Sectors. The Basic Materials Sector has been bearish for the last couple of years and is heralding the coming “gale of world-wide deflation” predicted by senior economist David Stockman (davidstockmanscontracorner.com). The Finance Group doubled its losses in the past week. The Federal Reserve’s refusal to raise short-term interest rates from zero (to begin the push for historically normal rates) has hurt the financial sector the most.

Here is the relative strength chart of the Energy Sector:
energy

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