Bent But Not Broken
This chart of Small-caps probably tells the story best. They ripped in 2020 and into early this year, and then stopped going up. It's been a mess all year.
I think at this point, we want to be looking at the areas that are diverging positively.
With breadth so weak, as everyone likes to remind you every day, where is breadth actually improving?
Small-cap Healthcare is one area for sure. Here is the $PSCH ETF overlaid with Biotech.
With Large-cap Healthcare making new all-time highs last week, is it time for the smalls and biotech to participate?
Remember these peaked in Q1 along with the Nasdaq Advance-Decline line, Nasdaq new highs list and so on....
So did the ARKK funds.
If these were the leaders to the downside this year, and the first areas to peak, what does that say about the market if they stopped going down?
And god forbid even started going up?
Meanwhile, in the more short-term, here is an updated chart of the S&P500.
Support came in again today at those former highs from September:
Things are messy now, but for the most part they've been messy all year.
The market is bent, but not broken.
So to me I think rather than pressing shorts, it may be a better idea to look for pockets of strength and focus on those areas.
Where are things strong when they shouldn't be if the world was coming to an end?
Broadcom made new all-time highs today. This thing continues to rip:
There are some Cryptos that look strong as well.
Look at Avalanche $AVAX
And Terra $LUNA just closed at new all-time highs for 3 days in a row:
These are the 9th and 10th largest cryptos, respectively.
There's relative strength out there.
You just have to look.
I think that rather than focusing on pressing shorts, if there's no bid for Treasury Bonds, I think it's for a reason.
Treasuries have seen no demand as of late.
Notice how TLT really had a selling climax in February before starting to carve out a bottom.
That wasn't a coincidence. Stock market breadth peaked at the exact same time and Treasury Bonds had maintained a steady bid ever since.
But not lately.
From where I'm sitting, things haven't fallen apart for the stock market, it's just still that mess that it has been all year for most stocks.
Some stocks have bucked that trend. Some risk assets have shown leadership, and for now that's where we want to focus our attention.
JC
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