The Nasdaq has been lagging for the entire year and that's simply because of the higher P/E's associated with those four letter stocks. In a declining global environment within a forced fed bull market the majority of the big money doesn't want to get caught in a bad Nasdaq earnings report and get slaughtered so that big money plays it safe and goes to the lower P/E, higher dividend world. The result is under performance in the Nasdaq and out performance in the Sp 500 and Dow. The Nasdaq got hit by a threesome of bad reports last night. Googl, Sbux and Msft. All three hit hard today and that trio, which is very heavily weighted, took the QQQ's down very hard today although there was the usual strong move off the lows as the day wore on. The bull market very much in tact with zero signs of topping out although there was some technical damage on the Nasdaq. I'm sure it'll heal up just fine in the days and weeks ahead as the Sp tries to break out over 2134. The damage done to the leaders such as Msft, Sbux and Googl will take time to heal up. Could take many, many weeks so you'll need patience in that part of the stock market world but that doesn't mean there aren't a tremendous number of great set ups out there that can work their way higher some of which we've been playing.
The market is very healthy but many will see things are bad now because a few stocks got hit hard and didn't really come back all that much. There were plenty of good earners that flew up today so it's not all bad although the earnings season overall has been pretty bad. That said, we all know that doesn't matter any more for the stock market. The only thing that matters is the fed and she'll be sure to try and keep the market up through the elections. The bull should last until they're over. So today was actually a bullish day since most of the areas of the market performed well while the big laggard known as the Nas followed the usual script. Nasdaq is down for the year while all else is doing just fine. Check under the hood by studying the advance/decline line which was nearly 2-1 positive across the board.
My big concern is the ever growing world of froth and complacency. When the Nasdaq was at the lows today, down over seventy points, the Vix was red. No fear anywhere to be found. Complacency is jumping big time and that's never a good thing for soon it'll get to a point where things will snap as they did last time when we fell between 14-22% depending on the index. We're not there yet but we're probably approaching the 30% spread and once there things usually ramp even faster so now I have that concern to deal with on top of the negative divergences that are everywhere on all the index charts. Daily and monthly charts are nasty. I know they may never matter but I still concern myself with these things as they remind ME NEVER to get complacent. Once I do I've joined the herd and even though that may be the prudent thing to do it's just not something I'm comfortable with. I always want to be against the herd even if I join their party just a little bit. I'll never jump in completely even if it's to my detriment. Have to play things appropriately even that appropriateness isn't working any more. So now I'll focus on those two normally bad things for the market bulls. Complacency and negative divergences. Of course I'll have longs as well but I will do so gently.
So if we break out over Sp 2134 we will have to deal with the worst divergences on those monthly charts that you will ever see. It doesn't seem as if it will matter. It should though. They are so bad it's almost impossible to accept that they won't matter but the power of the central banks are so powerful it is possible they won't matter. I wouldn't count on it but we may be finding soon enough. It would be great to find out if technical analysis has changed that much. It has already changed quite a bit but this would be amazing beyond words. That said, we still want to see a strong close over 2075 to set the ball in motion for a move to the next resistance level at 2104. 2116 follows that and then the big one or the old highs at 2134. 2075 remains all that matters as support on a closing basis. While we are long I want it known that I am nervous based on those enormous negative divergences. Day to day with next week likely giving us resolution.
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Peace,
Jack Steiman
Robert New
