As a boy, I loved the look and feel of horse racing on shows like ABC's Wide World of Sports. And I was especially a'giggle over the fellas who called the race. They could get you good and riled as the equines rounded the final curve and headed for the finish. There's little that's more exciting for an eight year old lad than to hear the call as the stretch run unfolds.
Here's a shot of Secretariat, one of the greatest horses of all time, running away with it at Belmont in 1973.
Horse history was made that day, as Secretariat coasted to the wire a full 31 lengths ahead of the second place finisher.
So it is sometimes with markets, too.
As the following chart makes clear, it's the NASDAQ leading the major markets lower as of Wednesday's close. Not by the same margin as Secretariat yet but clearly ahead, in what appears to be the beginning of an intermediate retracement for the market.
Here's the last ten days hourly truck in the three major indices. S&P 500 is blue. Dow is gold (no offense intended to the gold buggers).
The NASDAQ has fallen nearly twice as far from its February 18th highs as both the Dow and S&P 500. And while it's early yet, and while we still can't even be sure we have a secure top in place, it's almost certain that should we have a tumble here, the downside leader will be the bigger tech outfits.
For the record, it's also the techs that have led the market higher. Off the March '09 bear market bottom, the NAZ flew, racking up better scores to date than the same S&P (in blue) and Dow (in gold).
A betting man might GO short the NASDAQ and long the Dow if, like us, he were expecting a market pullback. Take the S&P 500 to show.
Reviewing last week's call (over which we garnered a great deal of feedback – keep it coming, folks!), we find some very interesting developments. If you remember, we put it like this:
"Are futures traders back to examining supply/demand fundamentals? And could that lead to a revaluing of some very troubling speculation going on of late in the softs?
We'll see.
We'll also bet on the shine coming off foodstuffs in general.
Call it like this: a simultaneous retreat in the CRB (maybe played with the DBA ETF) and the S&P 500 – along with a who-could-have-guessed-it flight to an oversold Treasury market."
Take a lookie-see here. These are the last ten trading days in DBA, the commodity foodstuffs ETF and TLT, the iShares Barclays 20+ Year Treasury Bond Fund:
Our Wall Street Elite author, and good friend, Hugh L. O'Haynew, made a similar call on bonds and commodities about a month back, but the blarney bloke was a tad early. Sorry, Hugh. Hate to have a larf at your expense. But it looks like the flows are only starting to pick up now, just a little later than you said they would.
Speaking of food, a global inflationary surge may be listed as the proximate cause of the revolutions that lit up the Arab world of late, but we have a feeling that history will show other causes behind this quirky, and most essentially Middle Eastern phenomenon.
Sure, food has run up. Wheat, corn, oats, soybeans, and most recently rice, have all been looking bubbly of late. But a glance at the charts shows that only rice has really 'deserved' its most recent rise. The rest look overcooked and bubble-frothy, like Rosie O'Donnell at Kangol's Wild Monday, All-You-Can-Eat Belly-Wagger.
The other observation we want to revisit comes from our February 3rd bulletin, Hope Kills, wherein we pointed up the weakness in the Dow Jones Transports and the Baltic Dry Freight Index, both key measures future business activity.
In short, the Transports look horrific. Here's the view:
The transports are down nearly 5% in three days, have broken below support at 5000 and are now sunk below a three wave rise that began in August of last year. RSI is sub-waterline and MACD is now splashing lower.
Keep your shorts on, friends!
Many happy returns,
Matt McAbby, Senior Analyst, Oakshire Financial
