The "Goldilocks Market Environment"

April 24, 2019

From the desk of Tom Bruni @BruniCharting

I saw a couple tweets yesterday about FAANG stocks and their "lack of participation" in the market's four month rally and just don't get it.

First it was a problem when the largest stocks in the S&P 500 were leading. Now it's a problem that most aren't hitting all-time highs with the S&P 500.

Here's an Equally-Weighted Index of the 10 largest S&P 500 stocks hitting all-time highs right alongside the S&P 500.

Click on chart to enlarge view.

Just because a lot of these stocks aren't hitting all-time highs themselves doesn't mean they're not helping (or leading) the market higher. In fact, 8/10 of them are up more than the S&P 500 since its December 24th closing low. What the hell do you mean they're not participating?

What do you people want? A "Goldilocks Market Environment" where each and every data point is pointing in the exact same direction? Have fun never putting money to work market, because it's not going to happen.

There will always be conflicting data points, but if you're going to lay out a case for taking the other side of a trend you could at least use evidence that's not refuted by two seconds of research. It's just lazy.

And while that lazy approach may not hurt you this time, over the long-term that type of analysis will not yield good results.

Have a great Wednesday y'all.

-Bruni