While this bear is busy mauling everything in its path, there are some pockets of strength. One of them is right under our very noses: the Nasdaq composite index.
The individual charts of the Nasdaq composite and the S&P 500 Index, each show a crushing bear market. But the relative chart shows that out of the two, the Nasdaq is surprisingly strong.
Going as far back as 2006, Nasdaq’s relative strength has been putting in higher highs and higher lows.
But before we can get excited, the ratio of the Nasdaq to the S&P 500 ratio has to break 1.90 - that’s because since 2004, it has been in a holding pattern below that level. The last time it broke through was in early 1999, and you know the rest of that story.
Of course, the sector that has everyone’s attention is the financials: banking, investment houses and brokerages. Although technically, a bull market doesn’t need the financial stocks leadership, this market has been primarily driven by the bank stocks because they have been the protagonists in this tragedy (or farce, depending on your point of view).
Today, the financials make up only about 10% of the S&P 500 index. So in a twisted sense, this sector has fallen so much that from here on in, it has much less weight to influence the general index. And that might be a good thing because while it may take decades for the US banks to come out from under the shadow of government intervention into some semblance of normalcy, the rest of the market can push forward.
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