Big Ben Pours Cold Water on Bulls
The stock market saw a very dramatic and emotional reversal today as fresh all time highs were seen in the morning followed by a vicious selling wave from the highs until 3:30. The hardest hit sectors all focused on dividends that would become less attractive if interest rates rose. Utilities, telecom, REITs and financials. Pundits were quick to compare today’s action to that seen at THE peak in 2007 and 2000, but I believe that is misplaced. While the price behavior may look similar for this one day, little else resembles 2007 and 2000.
At bull peaks like 2007 and 2000, we typically see the New York Stock Exchange Advance/Decline line diverge with price along with high yield bonds. Neither was seen. The same can be said of the Dow Jones Industrials and Transports. Additionally, we have almost no meaningful sector leadership warnings. I suppose there is a first for everything, but this would set a precedent for bull market peaks and I am not ready to drink that Kool-Aid yet although stocks could certainly fall 3-6% very easily here.