Tuesday, August 31, 2021

#USStocks Review #ES_F $SPY

US Stocks Review
Those that view the message of the market on a daily basis are likely confused by trading noise. While trading noise contributes to the long-term trends, it does not define them. Human behavior tries to explain trading noise as a meaningful trend. This confuses the majority which, in turn, contributes to their role as bag holders of trend transitions.

The global economy and stocks began behaving strangely in late summer of 2019. Repo rates spiked unexpectedly. Few acknowledged it. Anyone looking for a return to "normal" market by fundamentals will likely be disappointed in the coming years.

Stocks crashed in early 2020. Relative performance within the stock market suggests a reallocation of resources away from old to new economic plays. The old norm of "Made in USA" is not coming back. Manufacturing, design, and information collection will be borderless. Citizens will struggle to maintain their liberties and rights without oversight and intervention under this economic backdrop.

Rising stocks as the global and certain market groups decline is a real possibility that has been discussed for years. The stock market's distortion of reality is being attributed to the Federal Reserve. The Fed, contrary to popular opinion, is not that powerful. It cannot control the world's capital flows. The invisible hand, the true driver of market and trends, is redefining the world as the core economy passes from North American to Asia.

Subscriber Comments

Clearly, the divergence between the S&P 500 (shown below), Dow Industrials, and Nasdaq 100 against the broader market is nothing to worry about, right?  Wrong.

Russell 2000 to S&P 500 Oscillator

The Russell 2000 to S&P 500 Oscillator (LTCO) is below 0. It's been below zero for a long time. The negative divergence of small caps (broader market) relative to the S&P 500 illustrates a growing disconnect that often ends with a sharp price break.

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