The NASDAQ corrected more than 10% from February to early March while the DOW and S&P 500 had a very shallow, less than 5% correction. Since the February NASDAQ top, the DOW and S&P 500 took the lead over NASDAQ while the NASDAQ appears to be forming a double top.
Everything is going so well in the earnings season, the 10-year treasury yield has come down, the economy is on fire and the VIX has come down to pre-COVID level. What could go wrong? A lot could be wrong when everyone is so bullish. The stock market is never without any worries.
The NASDAQ (mainly supported by the big tech) broke out on the first day of April and continued to rally quietly last week. The DOW and S&P 500 continued to make all time highs while the VIX dropped below the pre-pandemic level. From the stock market point of view, COVID-19 didn’t happen. Or it happened, but it was quickly erased from memory.
Finally the small caps and value stocks are overbought and the tech stocks have corrected so much as to appear to be cheap. The time for the rotation to big tech and growth stocks is here now. It’s very funny how the street has been blaming the rising treasury yields all along to justify the selloff. Back in the 2000 DOTCOM bubble,
