January 19, 2022, 7:49 pm EST
The stock market showed leadership rotation today from industry levels. Existing strong leaders were pressed whereas new leaders emerged.
- Semiconductor: NVDA, AMD, AMAT, LRCX, KLAC, QCOM, STX, MU
- Mega Techs: AMZN, AAPL, TSLA
- Automobiles: F, GM
- Home Builders: LEN, PHM
- Gold: GFI, AG, AU, AGI, SBSW, GOLD, AEM, NEM
- Consumer Products: PG, KMB
As we can see the falling leaders outnumber the coming ones. It indicates the market encounters severe problems which everyone is aware of (rising rates, inflation, valuation, housing, jobs, etc) The question is that the moment finally arrived for the rollover or top-out in the first couple days of 2022.
Technically, Nasdaq already broke through its 200 DMA and the Dow Jones index almost touches it. Thus. the possibility of an oversold rebound may come. However, the breadth condition is going a downtrend since February 10, 2021, as indicated in the percent of stocks above the 200-day average (MMTH) chart. Details of usage is available in our 11/24/2021 article.
In summary, our view is that the bear market could arrive already according to this leadership rotation, breadth readings, and lost of 200 day-moving-average lines like Nasdaq. It would be better to ensure the portfolio is dominated by defensive types of positions. Gold/silver or consumer products may be able to rise but the overall market would be volatile and bleedy.