The Media is abuzz about an upturn in the stock market that could morph into an end of year Santa Clause rally. Let’s not get ahead of ourselves…
Yes the Market had excellent performance last week, but that came on the heels of three months of declines and abysmal performance the previous two weeks. Most of the enthusiasm driving last week’s upward movement can be attributed to the Fed not raising rates. Yet, while the big players in the S&P 500, DOW & NASDAQ are above their 50 & 200dma…they’re the exception.
The NYSE Composite, Equal Weight S&P 500, MidCaps & Small Caps are all below their 50 & 200dma. I find the under performance of the Small Cap RUSSELL2000 to be the most revealing, because it’s generally regarded as the economic “canary in the coal mine” indicator.
Note the below chart of the Small Cap Index. Last week’s “rally” wasn’t even sufficient to breakout above its 50dma. And the attempted uptrend is already receding. Furthermore, the 50dma remains below the 200dma. (As is the case with the Equal Weight S&P 500 & MidCaps.)
The floundering isn’t contained just within elements of US markets. This issue is global and commodity based.
Europe continues to teeter on the edge of recession with Germany’s industrial base in decline. Australia’s export economy is cooling while at the same time their inflation remains high, forcing them to again increase rates. China is experiencing deflation as its economy continues a multiyear decline. [SIDENOTE: It’s not much discussed (wonder why???) but the Shanghai Stock Exchange peaked on October 16, 2007.] India is fighting food inflation by restricting rice exports, which is detrimental to African nations.
Global demand is sluggish. Oil prices are in decline despite OPEC+ curtailments and a war in Israel. Copper prices are performing nearly as poorly as the Small Caps.
So…I remain concerned and find solace with the majority of my money parked in money market funds.
PODCAST INFO: I’ve been experiencing a prolonged case of bronchitis and by the end of the day, my voice has been too fragile to record a podcast…but I’m hopeful to get out an episode this week.
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