On Friday, June 9, 2017 the Nasdaq index had a relative large selloff of 1.8%. The market selloff had been mainly limited to the prior high flying winners in the tech sector. The banking sector has shown amazing resilience. $XLF was up 2.18% on Friday in the face of the tech selloff.
The fact the selloff has been limited to the tech $XLK, consumer discretionary $XLP, consumer staples $XLP and utility $XLU sectors is indicative of sector rotation. It is not a market crash. Simply the traders are moving money out of the above money making sectors and rolling them into the following sectors:
Most amazingly, the small cap $IWM has made an all time high last week. If it is a market crash, the selloff would have been indiscriminate, especially the small caps.
We believe this market rally is still well and alive. The market momentum was pumped by the central bank easy money policy. We are nowhere near the “normal” monetary policy prior to the 2007-2008 financial crisis. So the party will go on until we run out of the easy money.
We suggest our readers follow the hot money, take profit in the high flying tech stocks and move them into financial, healthcare, materials and small caps.