The much anticipated Fed’s Jackson Hole Economic Symposium came and went. The market took it as a non-event because Fed Chair Powell was dovish as usual. Powell mentioned that taper is coming but interest rates will remain low for a long time. The next Fed policy meeting is September 21st, which is about three weeks away.
We mostly hold a very concentrated portfolio of a few high conviction individual stocks. But we pay enormous amount of attention to the general market and the difference in performance between the major indices. Why so? Based on statistics, 75% of the individual stocks trade in the same direction of the general market.
So far in August the major indices are showing incredible strength by making small incremental new highs every other day or so. The general market is NOT advancing much, but definitely not coming down. The market breadth continues to narrow down, meaning less and less stocks are participating with the general market.
There tends to be a seasonal pattern that emerges concerning investment cycles. Traditionally, you get the summer highs followed by a crash into the seasonal Oct/Nov low. As long as that panic low holds, then the market will run off to new highs once more. However, when the Oct/Nov period produces a high, then that is far more serious and a decline thereafter typically follows into often the first quarter of the following year.
In our last Sunday blog, we mentioned that the NASDAQ would attempt 16000 in the next 4-6 weeks after it bounced sharply from 14200 support. TSLA reported earnings last Monday and the stock price chose not to respond to more than a tenfold increase on the $104 million the company reported in the same period last year.
