In what could only be described as a weird week, it was difficult to keep a pulse on what was going on.
Tech name after tech name continued to be decimated. The Nasdaq made a lower closing low on Thursday to end up bouncing up 1.5 % Friday afternoon.
For an index that was down sharply – 5.97% for the Nasdaq 100 – on the week, the market was very mixed. All kinds of different ways to look at it.
Across Canada and US markets combined – There were 1016 stocks down more than 5% while also having 718 stocks up more than 5%. Considering a plummeting index, there were only marginally more down than up. Only 300 stocks difference, usually it’s a 1000 or more separating the ups from the downs on weeks with big negative moves in the indexes.
Canada closed flat on the week. Mexico closed up 4% and the US was the worst of the week. North America price action was a random event. It was all over the performance spectrum! Shanghai which has been terrible, Hong Kong which has been worse, performed well. Considering all the problems in Europe, they didn’t crush the stock exchanges like the Fed did in the USA.
When I look at commodities, investors were bored with them Monday thru Thursday. While tech got ransacked this week, commodities were bid up, mostly on Friday, like we were having an economic revolution this week. Crude oil moved 5% on Friday, metals soared with Copper and Steel jumping on the back of a China reopening.
Check out the US sectors for the week. SLX (above) closed up 7.9% on the week, but materials (XLB) were only marginally up for the week. Crude oil and Natural Gas were up big for the week (above) but the energy stocks lagged the commodities. The three largest growth sectors (XLY,XLC, XLK) were crushed. Steel stocks soaring but technology plummeting. Frought with large swing risk, investors still bid up Friday.
So for me, it was a very hard week to analyze. If the next great recession is on it’s way, it wasn’t in the job numbers. If the next global growth party is starting, it looks like it is starting is Europe and Asia according to the performance this week. If the next commodity run is starting in energy, the energy stocks aren’t the best way to play it.
Mega Cap Tech:
The Fed really beat up the markets hard Wednesday and Thursday, and that was one of the reasons for the big mixed message. Tech stocks were train wrecks, with company ticker after ticker crashing lower. Amazon, Microsoft, Meta and Alphabet all made new 2022 lows this week. I realize the indexes are cap weighted, but the markets were very mixed in their story telling.
Perhaps the best way to show it is the performance by sector with the zero line being the $SPX. Those three sectors that underperformed dragged down the entire $SPX by 4% on the week. Only materials and energy were positive on the week, but they vastly outperformed the index.
That is just a wow.
Where do we go next, and where should we be invested? If institutions have to be invested, they are definitely rotating away from the nifty 7 into anything else.
On the Market Buzz this week, I covered off industrials and they have be steadily rising for each of the last three weeks. Click here to go see the video.
It is a wild trading environment out there. Keep protecting capital!
For more informative ideas check out OspreyStrategic.org.
Greg Schnell, CMT, MFTA