The fundamentals of the stock market are terrible

Sixty three percent of my relative-strength sectors shrank since February 1. If the financial group of sectors (only 3) is subtracted, it is then sixty-six percent. That must mean that there are relatively few stocks that are pushing up the stock indexes (the S&P 500, the Dow, and the Nasdaq Composite). Despite very low GDP growth, no appreciable wage gains in more than ten years, tens of millions of able-bodied working-age adults out of work – the stock market continues to rise with no technical sign of weakness. Just to underscore the point, the 60-minute graph of the S&P 500 since the beginning of February shows a bullish trend with prices completely conforming to the trend channel.

A modest gain in the Banking Sector pulled the Finance Group positive; every other group in my relative-strength stock sector table lost ground. The biggest loser was the Technology Group where there were only two gains out of seven sectors. The Cyclicals Group was also a big loser. Overall, there were only two sectors with gains over 4%, but there were five sectors with losses exceeding 5%. This underscores the weakness indicated by the high percentage of sectors that were losers. Significant losses in the Technology and Cyclicals Groups makes for a definitive defensive stance. Along the same lines is the Consumer Staples Group, with five winners and four losers showing money flowing to non-growth companies.

 

Below is the relative-strength graph of the energy sector. Stocks generally become weaker ahead of the futures markets. It was just this week that crude oil and gasoline broke below their wedge patterns.

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