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,
The stock market cycles are working quietly without a hitch while the media is talking up a storm about interest rates, the Fed, inflation and growth value rotation, etc.. It’s very confusing to figure out the effects from all the different variables on the stock market. The cycle analysis makes it simple as we don’t pay much attention
Despite the NASDAQ finding a bottom near its 30-week moving average in early March, it continues to be the weak index among the DOW and S&P 500. The 10-year treasury yield has made a higher high since early March, yet the NASDAQ hasn’t made a lower low. So the rising rates scare is only part of the excuses for this selloff.
