If you have been listening to our weekend show, I’ve covered some topics weekly that suggested we were anticipating some seasonal performance issues ahead in August with the month typically being a month we’ve seen volatility in the past. Considering the US equity markets were at all-time highs in July, it wasn’t so far-fetched an idea. Then the divergences began with the Dow Jones Industrial Average being the only index that was still going up. That’s typically a warning that breadth (or participation) was waning and a correction was due. The dip came and went and despite the natural disasters and missile shot across Japan’s bow, the market surprised everybody and rallied strong driven by technology and other growth areas. The Dow warned, but the Nasdaq answered.
After reaching fresh highs in July, the Russel 2000, the Nasdaq Composite, and the Dow Jones Transports began to consolidate. Meanwhile, the Dow Jones Industrial Average continued to climb into August. Whenever large cap companies outperform against small cap or the energy-sensitive transport index, it’s typically a leading indicator that investors are shifting risk out of the market.
This post was published at FinancialSense on 09/01/2017.
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