The stock market’s bearish trend continues

The Nasdaq Composite is still weaker than either the Dow or S&P; the angle of its bearish trend line is steeper. The Nasdaq is heavily weighted by major technology and bio-technology companies. These are known as growth companies when the economy is growing. But, the economy is close to shrinking; it was only a 0.5% GDP growth rate in the first quarter.


The current recovery is 82 months old. The average recovery since WWII is only 61 months. There have been only three that lasted longer than our 82 months: March 2001: 119 months, November 1982: 91 months and October 1960: 105 months. We also have very weak business sales. The ratio of business inventories to business sales has increased to 1.41 over this past year. This is a level that has only been seen during recessions.


My relative-strength stock sector table also shows widespread weakness. The only strong sector outside of the defensive consumer staples group is the Aerospace Sector. The Automobile Sector crashed in May; it is down 7.3%. The Transportation Sector, it provides a window into the health of manufacturing, is off 3.1% in May. The Pharmaceutical, Banks, Financials, Building, Leisure and Transportation all started to sink in the middle of April. The Basic Materials sector (i.e., it has the mining stocks) broke its bullish trend that started in mid January and is now down a huge 7.6% in May.


Here’s the S&P 500:

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