Your Rug Pull Arrived

August 5, 2023

It took most investors over a year to realize stocks had been in a bull market that whole time.

And now that, "breadth is finally improving" and, "the recession isn't coming", you get the classic rug pull and rotation into defensive sectors.

With a bearish momentum divergence and S&Ps flirting with short-term disaster here, our more defensive posture continues to make sense here.

Meanwhile, look at the bounce in Consumer Staples relative to Tech stocks right near logical support levels:

This defensive rotation comes right at the weakest time of the year for stocks.

So as a reminder, all of this is perfectly normal, just like all that strength had been over the past several quarters.

Anyone surprised by the market action in the past year clearly hasn't studied history.

This is all as normal as it gets. In fact, if markets weren't so strong since the back half of last year, then that would be abnormal.

And once again, the selling pressure this time of year is also right in line with all historical norms.

You can also see it in Commodities. This is a chart of the S&P500 relative to the CRB Commodities Index running into this multi-year downtrend line:

With Commodities outperforming since 2020, the CRB Index resuming its leadership role makes perfect sense this time of the year.

I still believe that the back half of 2023 is going to look much different than the first half.

So far we're seeing it.

My bet is that it continues.

We discussed it all on this week's live call.

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