Stocks move down (a bit) together

In previous weeks, the Dow and the S&P moved down or sideways while the Nasdaq moved up. Now, they’re moving down in unison. The Nasdaq’s trend is just barely angled down while the S&P’s and Dow’s trends are clearly down. But, the Nasdaq’s drop from Tuesday on was enough to make it impossible to draw a bullish trend line anymore.

On Thursday, Langer Research Associates released their Consumer Comfort index showing a level of 41. This means that most consumers are uncomfortable as the index ranges from zero to 100. Separately, both import and export prices sank more than 1% year over year in September after sinking more than 2% in August. This is evidence of deflation. Deflation is terrible for the economy once it sinks in, because it pushes people to buy later as they are likely to get a better price. This further slows economic activity.

My table of relative-strength stock-market sectors shows a shift. This week, the only group that gained strength is the Banking Group. The previously strong Technology Group is now a loser as are Staples and Cyclicals. If this heralds the long-awaited market correction, then it is good news, indeed. The stock market will again represent fair value only after the market sinks long and hard. While it is doing that, much easier profits will be available than have been during the recent sideways motion.

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