Tuesday, March 19, 2024

Morning Note: Boggles (and troubles) the Experienced Mind! And Your Weekly Results Update

So, the "magnificent seven" stocks that pretty much explain 2023's rally now represent a greater market cap than every equity market on the planet, save for only the US's:

The odds of this ultimately not ending well are, well... let's just say they're too high for comfort!

As is -- as we've been pointing out of late -- sentiment right here:

Per our recent video updates, the technicals look heavy right here as well... That said, as we've learned over many cycles -- both intimately over the past 40 years, and through our studies of cycles past -- stocks can sustain fundamentally-suspect levels for extended periods of time... As Investors Intelligence explains below (emphasis mine):   
"The bull-bear spread expanded further to +46.4%, from 43.4% a week ago. That is above the difference of +45.9% in Jul-2021, for the widest spread since Apr-2020 when it hit +47.0. Spreads above 40% spread point to elevated risk. The wider the positive spread, the higher the risk, with the +35% to +45% clearly there. Smaller differences, such at +17.2% late Oct-23, as buying chances in a bull market. We also recall that tops usually form over weeks (and sometimes months) while bottoms can occur quickly. In a bear market, such as late 2022, there were nine weeks with more bears than bulls (a negative spread), including -19.1% early Oct-22. Negative differences signal diminished risk and allow for broad accumulation. Please remember, advisor sentiment was originally designed to call bottoms, and market top signals occur over months."

One more present-moment phenomenon that boggles (and troubles) the experienced mind:

"Stock market concentration is everywhere. 

YTD, through Mar 18, the Russell 2000 (RTY) is down 0.52%. Two stocks, SuperMicro Computer, which is about to enter the S&P 500, and Microstrategy, accounted for 41.5 points of the RTY's YTD gain.

 Exclude them and the "Russell 1998" is down 2.1% YTD"

--Jim Bianco

Apparently it is unprecedented for 2 stocks to have such influence on an index with this many members (2,000).

Suffice to say that these are not the sort of phenomena we tend to see at market bottoms... Quite the opposite, in fact! 

Stay tuned... 

Here's your weekly sector, region and asset class results update:

Asian equities mostly sank overnight, with 11 of the 16 markets we track closing lower.

Europe's leaning green so far this morning, with 10 of the 19 bourses we follow trading up as I type.

US equity averages are lower to start the session: Dow by 29 points (0.07%), SP500 down 0.22%, SP500 Equal Weight down 0.07%, Nasdaq 100 down 0.55%, Nasdaq Comp down 0.48%, Russell 2000 down 0.49%.

This morning the VIX sits at 14.49.

Oil futures are up 0.27%, nat gas futures are up 2.47%, gold's down 0.18%, silver's down 0.65, copper futures are down 1.34% and the ag complex (DBA) is up 0.04%.

The 10-year treasury is up (yield down) and the dollar is up 0.31%.

Among our 35 core positions (excluding options hedges, cash and money market funds), 13 -- led by SPTL (long-term treasuries), EMB (emerging mkt bonds), XLE (energy stocks), XLP (consumer staples stocks) and XLI (industrial stocks) -- are in the green so far this morning... The losers are being led lower by URNM (uranium miners), GDX (gold miners), EWW (Mexico equities), EWM (Malaysia equities) and SLV (silver).

Yesterday's timely quote bears repeating right here:
“The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing—these factors are near universal. Thus they have a profound collective impact on most investors and most markets. This is especially true at the market extremes. The result is mistakes—frequent, widespread, recurring, expensive mistakes.
—Howard Marks

Have a great day!

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