• The general market still looks good but growth stocks are the problem

    Markets were weak last Friday, but the dips were bought and a V formed recovered took place.
    How relevant was this recovery? Totally irrelevant: it was a simple options expirations game. Nothing to conclude from, but still worthy to note: the reversal was as irrelevant as the plunge.
    The story was not there to be seen.



    Long term we are still in a process of testing the previous highs... and I still believe that this will be done. Not sure that the markets will break higher, but that is another story.



    The Futures closed below their average line, but this was probably also due to options expiration.





    The NQ8 MF was weaker on Friday, but so was the XLK MF.



    The XLK story is I believe more important.



    The real story of last Friday was the continued weakness in the Tech/Communication related sectors.



    We can see below that the vast majority of the tech sectors were under heavy selling... for the third consecutive day! This was not due to options expiration. It was because XLK was under pressure, which pulled every other tech related ETF down. The second reason was fear of possible wave of earning misses.



    Cloud stocks for example were under heavy selling on Friday, which should not be happening in a general market at almost an all time highs. Especially in the context of the US/China trade issue being - partially - resolved and the Fed pouring fresh QE money.



    By comparison, the industrial sectors were mostly positive on Friday.



    Copper was also under accumulation and the 10Y are still being sold (equities bullish.)





    Conclusions:

    What does this tell us?

    First that the general market is not ready to fall over.
    Second that there is great fear related to growth stocks (overhyped stocks with great futures and low profitability.)

    If I read this correctly, earnings should be OK for large caps, but many small caps will badly fail without this having any incidence on the general market.

    A buying opportunity will develop on the tech growth stocks, but we will need to wait a little longer. Buying fear only works after there has been much fear, which is not the case yet.