Were the soothing words from Herbert Hoover mid-week the last cinch of the noose?
So far, this has been a classic bull trap. When the Transports confirmed the "Dow Industrials" it seemed that the breakout above January highs was on solid footing. There was only one problem, the Dow has been reconfigured to include several Tech stocks which are what powered it to new all time highs.
However, the pure-play Industrials NEVER confirmed the Transports:
What gamblers were doing is bidding up Transports under the auspice of an improving economy and then using the rally as confirmation of an improving economy.
Not to say that they are new to conning themselves:
Remember GE? Wall Street had that most venerable of U.S. industrial companies removed from the Dow, because it wasn't confirming their 300 P/E momentum-driven delusion:
In summary, the broader market never confirmed the S&P breakout.
It was all stock buyback driven tax cut sugar high:
Now of course the casino is still massively concentrated towards Tech stocks. And it's even more skewed than ever due to the recent re-shuffling. Microsoft and Apple have greater weighting than before. No surprise, these are the two stocks that haven't broken down. Yet.
Here we see that Apple is still near record highs, whereas their primary Asian (Taiwanese) supplier is in 2008 mode:
So the jury is out on Info Tech as long as Apple and Microsoft don't roll over. At which point they will implode the entire casino.
Where this all gets interesting is in the positioning. Because as one would expect, an aging society confronted with persistent deflation has no "choice" but to increase their exposure to risk. Which is what we see below via Mutual Fund cash balances.
Overlaid with cash balances are the pure play Industrials shown above. In Y2K, gamblers exited ahead of the recession. In 2008, they lingered a bit too long. This time, they're ALL IN.
"Technology and internet-based companies are known for their high profit margins, and many have reported explosive growth in recent years, with corresponding gains in their stock prices. That’s made them particularly vulnerable to higher interest rates, because it makes the stocks’ already high valuations look even more stretched."
"Sears Holdings, the parent company of Sears and Kmart, is among dozens of prominent retailers to declare bankruptcy in the era of Amazon"
"There was no one left to use up"
