The stock market turned more bearish last week. But, if this is the beginning of a bearish trend, it is the very early beginning of it. The Nasdaq is not fully on board the bearish train. It can be seen as either moving sideways or starting down.
It’s also useful to look at the distance the market would have to travel to reach new highs. For the Dow and S&P, it’ is the early March high. This high is higher than both the mid March and April 6 highs. But the Nasdaq Composite’s previous high is the recent April 6 high that was equal to its previous recent highs.
My relative-strength market-sector table shows Consumer Staples as the only positive group. This is typical of weak stock market periods because money flows to defensive issues. A 3.6% drop in the Semiconductor Sector (in March it was a 6.1% gain) pushed down the Technology Group to a loss. A drop of only 0.2% in the Auto Sector reversed a 6.7% gain in March and helped, along with a 3.1% loss in the Basic Materials Sector pushed down the Cyclicals Sector. This latter weakness is evidence of world-wide deflation.
The “recovery” since the 2008 – 2010 recession has bean very weak, but it has, at the same time, been better than the worst parts of the recession. But, the economy may be headed for another recession: weakness in restaurants means consumers are hurting financially,
Here’s the Basic Materials Sector relative-strength chart: