The stock market has formed a wedge pattern

The stock market has formed a wedge pattern in all three stock indexes. Wedge patterns constrict prices into a smaller and smaller area prior to a, usually, strong blowout either up or down. The progress of a bullish trend is not only the line drawn under the lows, it is also that the highs have to keep pace. It is when the highs are dragging behind the gains of the lows that wedges are formed. So, in essence, wedges reflect an absence of demand.

My graph dividing cyclicals by consumer staples has been dropping (i.e., staples are much stronger than the cyclicals) since early December, 2016. My table of relative-strength stock sectors shows the Staples Group losing 1.03%. But only four of the nine sectors in that group were negative; a huge 12.1% loss in the Apparel Sector pulled down the entire group. Both the Cyclicals and Technology Groups have to be solidly bullish to move the market higher. But, the Technology Group at 4.1% is growing much faster than the Cyclicals Group at only 1.1%.

 

Here are the fundamentals for the most-bullish Software and Services Sector:

 

Symbol Last Qtr EPS Last Qtr Sales
TNGO -78% 4%
PANW 62% 34%
CA 0% -3%
EA -101% 7%
NUAN 0% 0%
ATVI 152% 58%
CRM 14% 25%
ORCL 3% 0%
MSFT 9% 1%

 

This averages out to only 6.8% EPS growth and only 14% sales growth in the last quarter. That’s truly pathetic for the “best” stock sector.

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