Perhaps The Most Concentrated Market Advance In History

By: Kent Engelke | Capitol Securities

Many times I have commented about the massive market imbalances, defined as a narrow based advanced focused in a handful of stocks. Many times I have used the number 5 to define this narrowness utilizing industry reports and data to back my statements.

Yesterday the front page of the WSJ read “Index of 500 Stocks is Powered by Just Three.” The article asserts three technology titans have powered nearly half of the 2018 S & P 500 advance. One issue alone accounted for 27% of the rise. Another accounted for 13% and the last 8.3%. Overall, technology has accounted for 75% of the S & P 500 gains, according to the WSJ. In 2017, technology was about 60% of the S & P 500 advance.

I do think it is noteworthy that two mega-sized financials have contributed about 12% to 2018 gains.

Wow! Talk about a myopic market. I thought 2000 was narrow.

Yesterday, the Dow advanced, but the advance was led by the oils, the most beleaguered S & P sector. It is also the sector that is trading at the greatest discount to the price of oil and to the overall S & P in history. The catalyst for the advance was an expected drop in inventories, the largest draw in five weeks and surging exports. Moreover, the data indicated the first drop in production since early January versus a forecasted rise.

The NASDAQ and S & P were nominally lower, the inverse of the status quo.

What will happen today?

Last night the foreign markets were mixed. London was down 0.21%, Paris was down 0.12% and Frankfurt was up 0.13%. China was up 0.63%, Japan was up 0.72% and Hang Sang was up 0.97%.

The Dow should open nominally higher as Treasury prices have steadied. The 10-year is up 9/32 to yield 2.89%.


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