We saw some of the most bullish sentiment readings in years. And this sentiment came after a historic rally for equities throughout the 4th quarter last year that couldn't miss. Everything was working.
But things can't just go up forever. They need to rest eventually, and reset some of that excessive optimism.
That's exactly what happened.
Despite some of the growth indexes making new highs, a lot of the most important groups of stocks have done absolutely nothing since February.
Look at Consumer Discretionary, Financials, Industrials and Healthcare trading sideways to down this entire time:
Tomorrow is the last day of June. So do you know what that means????
NEW MONTHLY CHARTS!!!!
If you're new around here, I will just tell you that there is NOTHING, and I mean absolutely NOTHING, I do that adds more value to my approach than this process of taking a step back and reviewing a list of Monthly Charts.
It's so easy to get lost in the day to day noise of the markets.... What did the Dow do today? What did the Powell say? Who reported earnings this morning? etc etc...
I have found over the years that it is so important to just stop, take a deep breath, and focus on the direction of the primary trends.
The reason is because asset prices trend. They're not random. We know this. It's just a fact.
So if we know for a fact that asset prices trend, don't you think it would be advantageous to identify the direction of those trends?
As it turns out the answer is an overwhelming YES!
Here's a good example of the Nasdaq going back 25 years.
The U.S. Industrials sector represents one of the most important groups of stocks in the entire market.
So with new all-time highs in the S&P500 and Russell3000, then why are Industrials, who historically have the highest correlation with these indexes, not able to keep up?
Industrials are actually down over the past 3 months.
But the Aerospace & Defense stocks, that fall within the category of Industrials, continue to hit new all-time highs.
On Friday you saw the highest weekly close for the S&P500 in history.
Do you know how many stocks on the entire NYSE closed at a new 52-week high?
12.
Meanwhile in ETF land, the Nasdaq100 $QQQ and S&P500 $SPY hit new all-time highs on Friday, but we also saw fresh 6-week lows for the NYSE Advance-Decline line. It was also a new 6-month low for the Nasdaq Advance-Decline line, for those keeping score at home.
Here's a chart of all the S&P Sectors on an equally-weighted basis over the past 15 weeks. Consumer Discretionary has been the worst. Utilities have been the best by far.
You'll notice that the Equally-weighted S&P500 and Nasdaq100 have made no progress or are down during this period.
It's not a bad thing for America, Americans or the American Stock Market that the largest companies in the country are going up in price.
The best players are scoring a lot of points.
That's perfectly normal.
In fact, if you go back and study every bull market over the past 100 years, you'll notice that Technology is a leader in almost every single one of them.
Tech stocks doing well, and outperforming other sectors, is just a classic characteristic of a bull market.