The stock market has moved up to strong resistance

The stock market has again tried to move through strong resistance and failed, just as it has, seemingly dozens of times before, since early 2015. The Dow is the strongest and the Nasdaq Composite the weakest; this is just the reverse of what is seen during strong bullish moves. This is because the Dow contains big industrial companies that are conservative plays; the Nasdaq has most of the smaller growth companies.

The stocks fundamentals continue to deteriorate:

  • The Philadelphia Fed: their manufacturing index dropped from 12.4 in March to -1.6 in April. New orders dropped to zero from 15.7 and jobs crashed from -1.1 to -18.5 making this the worst job figure since July, 2009, right after the great recession.
  • Single-family housing construction has not recovered from the great recession. Its level is still below the 1995 amount.
  • Rail traffic was down 10.1% last week and 7.3% ytd.
  • China cell phone sales growth has plunged from 80% in 2013 to less than 20% i n 2014 and negligible in 2015!

Looking at the stock indexes where every bar is a week, it is easy to see the lower highs and lower lows since late 2014 in the S&P and Nasdaq.  This is bearish by definition. My sector table shows every sector in the Technology Group losing relative strength with the exception of bio-technology. In addition, most of the losses are worse than -4% since April 1. This is very weak. In bullish times, it is the Technology Group that leads the way.

If you have ETF’s or mutual funds invested in the stock market, this would be an excellent time to put this money in to something safe – like U.S. bonds. The important thing is safety, not yield.

Here is the relative-strength chart of the semiconductor sector:

semiconductor

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