Marketview: Sentimental Highs

Very slow action in the market this week.  I’ve heard a lot of chatter about how low the volumes are and how terrible this is for the markets.  I even heard someone remark that it was like the rally wasn’t even happening.  Trust me, it happened.  The accounts were settled and the money moved all the same.  If you were one of those in disbelief then the market will likely continue to feel surreal because volumes are on a secular shift lower.  I doubt we will ever see the volumes back at what we consider historical norms.  My take is that volume is decreasing at the same time volatility is increasing.  Not volatility in the traditional sense, but intermittent event-driven non-traditional volatility and noise.  This is a direct result of decreased overall market participation coupled with the increase in available technology in a system designed to eliminate above average returns for the majority of participants.  Non-traditional event-driven (manufactured) volatility does a great job of eliminating excessive returns.  The market adapts.

Sentiment is no longer low, but hate is still near record highs.  All the while, the market continues to act very well.  Breadth is very nice and technology stocks, led by $AAPL at new all-time highs.  The senior indices will not be far behind.  I’ve been saying for weeks and months that we favored the upside even though there would be chop along the way.  Next week we have to suffer through the peculiar and undoubtedly slow week which rests between Option Expiration and the Nonfarm Payroll report.

Bottom line, the market has lots of room to the upside but I’m sure there will be some “events” that shakes things up along the way.

Winners: $CSCO, $GOOG, $AAPL, $AMZN, $BAC, $UTX, $FDX

Losers: $EXC, $SO, $MRK, $LLY, $BHI, $DVN, $OXY, $FCX

Below is the chart of my preferred Value vs Growth chart.  As you can see, value is outperforming growth on this run higher and broke above a lower high at the beginning of August.  Value out performance is typically associated with a more sustainable run.  If this chart was making lows, I’d be a lot more skeptical of the rally — but it’s not.


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