Weak Indices Masking Some Underlying Strength
Friday was another down day on the ugly side with the S&P 500 down 1% and the NASDAQ 100 was down 2%. However, the Russell 2000 was up and there were 1000 more stocks going up than down on the NYSE. For a change, the generals were weak, but the troops were strong. Keep that tidbit under your hat and don’t toss it aside.
The new week starts with all of the major stock market indices oversold on a short-term basis and looking to bounce. In a perfect world I would want to see stocks bounce for a few days and then try to find a bottom next week. This remains in line with what I forecast at the beginning of the year. A Q1 peak and then a Q2 low by Memorial Day followed by new highs by Labor Day.
Last week, I wrote about the two enemies of the stock market, bonds and the dollar. Let me be crystal clear about the bond yields from the chart below. If the 10-Year gets much above 4.70%, it will put a damper on stocks and make it much more difficult to see a bottom around these levels.
The silver lining to all this is that the stocks I have been hammering on all year to sell and lighten up on are selling off enough to begin to get my attention again. I took a lot of heat when I repeatedly said it was good portfolio management to sell Broadcom, Marvell, Tyler, Supermicro and Micron while lightening up on Apple, Nvdia, Tesla, Microsoft and Google.
On Friday we sold ZTS, ICE, some FREL and some RYRIX.
