On Monday, the market stumbled out of the gate on a variety of issues, including trade, political hijinks, and normal reactions after the parabolic month of gains into records established on Friday. 

From August 15^th major indices moves:

• Dow Jones Industrial Average: 1,500 points of 6%
• S&P 500: 111 points or 3%
• NASDAQ: 212 points or 2.7%

Yesterday, NASDAQ found its footing and rallied higher, lifted by tech names that also helped the S&P 500 Communications Sector (XLC) to a slim gain on its first official day of trading.

I wasn’t too happy with market breadth, which I think points to the fact the broad market isn’t priced for perfection. However, individual names pay a massive toll for any miscue.

I must say that while the selling in losers creates opportunities, is also worrisome as it presents big problems for investors. To hold quality names persistently under pressure has always been a big challenge. Just make sure the fundamentals are solid, and investment propositions are outstanding.

Market Breadth	NYSE	NASDAQ
Advancers	966	1,188
Decliners	2,006	1,851
New 52- week highs	47	43
New 52- week lows	112	52
Advancing volume	998.5 million	1.2 billion
Declining volume	2.3 billion	1.1 billion

The Message of the Session

Although the Dow and S&P 500 were down on the day, investors once again, looking to put money to work somewhere rather than fleeing wholesale to the sidelines. That’s a good signal. The weakness in defensive sectors: Real Estate (XLRE) and Utilities (XLU) were also a positive sign.

Investors are very busy seeking out the wheat from the chaff and looking to load up on winners, allowing all other publicly traded names to slide.

S&P 500 Index	-0.31%
Communication Services (XLC)	+0.08%
Consumer Discretionary (XLY)	-0.62%
Consumer Staples (XLP)	-1.45%
Energy (XLE)	+1.58%
Financials (XLF)	-1.04%
Health Care (XLV)	+0.22%
Industrials (XLI)	-1.63%
Materials (XLB)	-1.36%
Real Estate (XLRE)	-1.96%
Technology (XLK)	+0.47%
Utilities (XLU)	-0.89%

I sense investors are champing at the bit to buy Technology (XLK) stocks, in part because of their track record and their ability to cover large swathes of ground quickly.

Financials (XLF) were the biggest disappointment. Wells Fargo (WFC) was the biggest loser. However, a mix of small banks and Wall Street giants all fell under pressure yesterday.

Energy (XLE) was the best performing sector in the market as West Texas Intermediate (WTI) surged through a key resistance point to finish at $72.24.

The next big test comes right above $74.00.

Although several names enjoyed greater percentage gains, Exxon Mobile (XOM) is a gargantuan (23.6%) weighting of the index and rallied more than 1%. The XLE also helped by EOG Resources (EOG), which is more than 4% of the index.

Stop Guessing Tops

There was a good piece in Bloomberg outlining the mind-boggling outperformance of U.S. stocks versus a variety of investments, including returns for hedge funds and even venture capital funds.

For me, the moral of the story is stop underestimating how great American companies are. Stop guessing at market tops because the sad postscript to these facts is so many investors have missed the ride.

U.S. Stocks Annual Outperformance Against Other Investments Since 2009
Overseas Stocks	6.6 Percentage Points
US Bonds	11.8 Percentage Points
Hedge Funds	9.4 Percentage Points
Venture Capital	2.5 Percentage Points

Despite beating bonds for a decade, big money managers are wedded to that investment. I’m beginning to wonder when they will seek better returns for investors.

That question and others might be answered at the Federal Open Market Committee (FOMC) meeting this week.

Today’s Session

Equity futures were up big early this morning, but a series of news and negative speculation among big tech is taking an early toll.

Facebook (FB) is down on news the founders of Instagram are leaving the company. This is terrible news as the company shares have already been under pressure after a lackluster earnings release.  Facebook is old and staid, while Instagram has enjoyed rapid growth.

This is another test for the market to see if funds rotate into other areas (read “dull”) of the market. 

 

 

 

 

 

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