The Magnificent Seven tech stocks powered the market on the way up. They will likely power the market on the way down.
The NASD had a lousy first four days this week. After peaking over 18,600 last week, at the Thursday close it was 17,871. Apple has performed the best of the Seven. It peaked at $237 and is now $224. That is not a rout but all Seven are down.
Both the Industrials and the Transports peaked and reversed course Thursday. The Industrials were off 1.29%. The Transports dropped 1.77%. Taking out the previous Transport low of 15,000 (now 15,787), will confirm this is more than a short-term correction.
Other indicators show serious reversals. The percent of SPX stocks over their 200 day moving average dropped 4.48% Thursday. The New York Stock Exchange advance decline line has hit a new high. It has not posted a reversal yet.
Crude oil continues its rise. It closed at $81.30 Thursday. Apache (APA) has come alive again. It reached its 200 day moving average closing at $32.15. ExxonMobil (XOM) has risen from $111 two weeks ago to $118.80 Thursday. Chevron (CVX) has had a similar rise from $153 to $161.97. Energy shares seem to be predicting higher crude oil prices.
Energy service stocks are a mixed bag. Leader Halliburton (HAL) has risen from $33 to $37. Schlumberger has had a similar rise from $43 to $48.72.
Bond prices are tracking to the upside. The ETF TLT of 20 year bonds has risen from $88 to $93.47. Given the strong showing in energy and crude prices, Chairman Powell and assorted other FED officials might better serve themselves by simply being quiet.
Gold prices also suggest the FED target of 2% inflation is illusory. Gold has broken out of its $2,300 to $2,400 range. It closed Thursday at $2,456.
Silver has lagged gold, still testing its $30 level.
A final thought, is the stock market sell-off linked to the Dump Biden and then do what movement? This column has been warning to an overbought market all year. We are there now. It is true markets dislike uncertainty. And there are many questions if Biden chooses not to run. Does he stay till next January? Does Kamala Harris get the bid? Or do we have what political junkies dream of, an open convention and a fight for the nomination, call it sharks in the water. This does reflect an international mood of disliking anyone in office. Britain and France just displaced both their parties. Trudeau in Canada is unpopular. Negative mood is on the rise. If it continues (two wars, inflation, stagnant wages) the stock market sell off will continue.
