Stocks tumble to a June low

Stocks fell below the June 16 low and closed near the day’s low on heavy volume; this was a very bearish day. The S&P has lost 2.7% in June, the Dow lost 2% and the Nasdaq Composite lost the most: 4.5%. The stock market fell in response to the British referendum to leave Europe. The market is highly over-priced at 24 times LTM earnings and at over 30 times GAAP earnings it is ludicrously out of wack. The market has been rolling over for many months (this is seen easiest in weekly charts); it could have been anything to trigger a sell off. The stock market is significantly below its 2016 highs: the Dow is off 5.2%, the S&P 4.6% and the Nasdaq Composite is the weakest – it’s off 10% since its early July high.

My graph of cyclicals divided by consumer staples has been sinking since March, 2015; this parallels the fall of the S&P during the same period. My table of relative-strength stock-market sectors shows a defensive stance coming back in force. The Consumer Staples Group gained a huge 1.26% in June compared to a loss of 0.82 in the Technology Group, a loss of a gigantic 5.9% in the Finance Group and a 1.1% gain in the Cyclicals Group. But this Cyclicals’ gain is skewed by the huge gain (7.5%) in the Basic Materials sector. The Utility Sector, a harbinger of defensiveness, zoomed up a big 4.9% in June.

Here’s the relative-strength chart of the Utilities Sector:


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