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NASDAQ ENDS ITS WORST WEEK SINCE MARCH[Chart courtesy of MarketWatch.com]
- Moving the markets
An early bounce was not enough to restore the bullish momentum, as the Nasdaq bobbed and weaved throughout the session, closing in the red and ending its worst week since March with a loss of -4.2%.
The Dow and S&P 500 whipsawed as well but managed to eke out green closes but, for the week, the latter slipped by some -2.5% while the former now shows a -3% performance YTD.
“Markets continue to struggle finding an equilibrium,” said Mark Hackett, chief of investment research at Nationwide. “This market is more akin to the emotional swings of March and April than in recent months. We are likely to continue in a period of directionless volatility as bulls and bears wrestle between the strong Fed liquidity and improving economic backdrop and the continued uncertainty and elevated valuations.”
I agree with that, but I also think that the next few sessions will be critical with bulls and bears continuing their tug-of-war with the bulls looking for signs of support, as the major indexes head towards their respective 50 day M/As. If that support is violated, we may see an acceleration of downward momentum.
In fact, FANGMAN (Facebook, Apple, Netflix, Google, Microsoft, Amazon, Nvidia) has lost over $1tn in market cap this week and still accounts for over 25% of the total market value of all S&P 500 comps.
On the economic front, the Labor Department reported that the consumer price index rose 0.4% in August vs. expectations of 0.3%. Contributing to this rise was a spike in used car and furniture prices, while rent inflation slowed.
The divergence between the Nasdaq and the 10-year yield, while having narrowed, is still extremely wide, and it will take a correction of gigantic proportions to restore synchronicity again.Read More