The market got itself well-ahead of the prevailing long-term weekly trend in January and again in March, prompting a sell off back to support. We're now back there again, and this time it's different, except it's not. When everything fed by the media is bullish and retail are euphoric, that is the time to take a step back.
The Nasdaq is up 9 % in 2018 (a very healthy yearly return even before the half way point); the Dow is -1%. That is a divergence that should not be ignored. The Nasdaq has outperformed the Dow since 2008 and rightly so, but the Nasdaq/Dow ratio oscillates in a channel, and we are at the top of that channel now (see chart on StockTwits). I predict the Dow to outperform the Nasdaq in the second half, but both to stumble.
Remember the Fed is winding up it's balance sheet. Each time they receive the principal back from a maturing bond they no longer reinvest that money; instead some numbers in an make-believe balance sheet change and the supply of money reduces. That is money no longer going into the equity market.
Also including Tariff-wars, Fed rate hikes, appreciating dollar, turmoil in the Eurozone/Middle East and never-ending supply of IPOs, I'm leaning towards a negative catalyst for the US market, but this time it's different right?
The Nasdaq is up 9 % in 2018 (a very healthy yearly return even before the half way point); the Dow is -1%. That is a divergence that should not be ignored. The Nasdaq has outperformed the Dow since 2008 and rightly so, but the Nasdaq/Dow ratio oscillates in a channel, and we are at the top of that channel now (see chart on StockTwits). I predict the Dow to outperform the Nasdaq in the second half, but both to stumble.
Remember the Fed is winding up it's balance sheet. Each time they receive the principal back from a maturing bond they no longer reinvest that money; instead some numbers in an make-believe balance sheet change and the supply of money reduces. That is money no longer going into the equity market.
Also including Tariff-wars, Fed rate hikes, appreciating dollar, turmoil in the Eurozone/Middle East and never-ending supply of IPOs, I'm leaning towards a negative catalyst for the US market, but this time it's different right?