What's Wrong With This Market

This blog is a second take on what I find unrecognizable in the current market, from markets past.

You can find my first take on this topic, plus an important market update, linked 

1. Tech is no longer leading the broader market. In fact, recently we've seen defensive sectors - such as utilities & healthcare - leading... and that has gone mostly unreported.

2. Not only are tech stocks no longer leading, but neither is the $SPX... 

The $NYSE, and even the Dow Jones broke out to new all time highs, while the $SPX could barely keep it's head above water. Not to mention, the Dow seems to rally every time the Nasdaq sells off.

I have my own theories as to why that may be, but I don't have time to get into here.     

3. Transportation stocks no longer lead the Dow Jones. This goes to Dow Theory   investopedia.com 

In fact transports have been trending lower for the past 3 years, as the Dow continues to make new all time highs.

You'll find my pullback target for the Dow Jones linked 

4. Gold and Crypto markets are influencing the broader market, to a greater extent. I can't tell you for sure if the fear of a collapse of the $USD is real, or not, but that seems to be the story fueling the recent action in Gold, and the Crypto market frenzy.     

5.  The recent Volatility - as represented by the $VIX - is off the chart!

$VIX hitting 65 in one day/week - as we recently saw  is something we have never seen before! The closest thing we saw to this was during the covid crash, but even that was more contained...

This phenomenon can easily be explained by the Volmageddon Trade, but still this is nothing investors have ever had to deal with in the past.

See: Volmageddon and the Failure of Short Volatility Products (Summary) rpc.cfainstitute.org

6. The absence of bullish market capitulation points. Meaning the weak hands are no longer shaken out.That is a fundamental shift, we've never seen before. It could be that because the markets are now mostly controlled by the machines, and machines don't experience fear, there is no longer panic selling.    

 I think one of the biggest things to change in the (broader) market, is the fact that we no longer see bearish sentiment peak out. There is no capitulation point.Only engineered pullbacks, followed by short squeezes.

Meanwhile the market continues to trade into the biggest bubble in our lifetimes. 

7. Global markets are outpacing US markets; India, Japan (before the crash). Again, money fleeing US markets.

What Is a Carry Trade, and How Did a Small Rate Hike in Japan Just Trigger a Global Sell-Off? Aug 5. 2024 - The Motley Fool

 As aforementioned, I think a lot of the funny market action we're seeing is do to the fact that machines are running the market, but also excess liquidity has to go somewhere - Crypto, Japan, even India - not to mention Russian investor money finding it's way into foreign markets. On top of all that we have daily options, being used to drive the $VIX, and the rest of the highly manipulated options market.  

 I think maybe someday we may get back to more normal/stable markets, but not until after a major collapse, and possibly the entire collapse of the global financial system. 

Take Care, AA

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