Maybe Tech Won’t Crash, But Perhaps Market Leadership Changes

Great post by Gary Morrow (@garysmorrow) on the positive outside day day in the Dow 30 today, versus the downside outside day yesterday in the Nasdaq 100, a very ominous sign.

The expectation was we’d see more selling in the Nasdaq and Nasdaq-100 today and it didn’t happen.

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Morrow highlighted Caterpillar today, so using YCharts, apeek was taken at the 5 and 10-year returns of CAT versus the SP 500:

 

5-year chart:

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10-year chart: 

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What surprised me is that with CAT not having made a new all-time-high since January, 2018, and then seeing it’s stock price cut almost in half by March 23, 2020, the stock’s performance versus the SP 500 has actually fared well.

Yes, CAT’s under-performed versus the key benchmark, but just barely. (Be sure and look at the “average, annual” returns at the top of the chart.)

Summary / conclusion: CAT hasn’t been owned in years in client accounts, but reading Morrow’s note, and looking at the relative returns and wondering if the outside day on Monday, June 13th, 2020, means that Tech maybe won’t “crash” but will start to give up some its relative strength, perhaps it’s time to look harder at “value” and other themed-plays.

Morrow is a good technician. Be sure and give him a follow on Twitter and LinkedIn. He’ll make you money.

Take everything you read here with a healthy skepticism. Think for yourself based on your own idea of risk. Sometimes ideas work right away, and sometimes not at all. Sometimes capital market conditions change so very quickly.

A lot of what is written on this blog is a way of thinking out loud and putting thoughts to paper.

Thanks for reading.

 

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