A Tectonic Shift in the Markets Is Underway

[Trading With Larry Benedict]( A Tectonic Shift in the Markets Is Underway By Eric Shamilov, analyst, Trading With Larry Benedict Earnings from Microsoft (MSFT) and Meta (META) delivered big this week… Meta’s move after its earnings release on Wednesday sent the stock up 11% in after-hours trading… and with that accounted for more than 100% of the Nasdaq 100’s total upside move... Some estimates, like that from the widely followed ZeroHedge, had Meta accounting for 140% of the total… “MSFT alone accounted for ~140% of the move in the NDX today (114 points of the 81 point move).” One stock… 140% of the entire market’s move. And that had a lot of market skeptics pointing to the lack of market breadth lately, where most stocks haven’t been participating in the continued shake-off of broad-ranging risks… Risks like the narrative pushed by the Federal Reserve and others that recent banking failures have been isolated incidents and contained to just a few banks… First Republic Bank (FRC) is the latest example of this narrative potentially being wrong… During its recent earnings call, the CEO refused to take questions after posting less-than-comforting numbers, sending the stock down from $16 to a low of $4.76… not a good look. Market breadth has been a big issue when it comes to the market… A small sliver of large-cap tech names have been carrying the market… which is why even with Meta’s big move, as well as MSFT’s 8% post-earnings gain… The indexes are still in no-man’s land all month long. But underneath it all… The market has been undergoing an extremely bearish rotation despite the indexes being flat on the month. Recommended Link [Another market crash is NOT coming]( [image]( Market Wizard Larry Benedict accurately predicted the 2020 and 2022 crashes. Now he’s coming forward with a new prediction… Only this time, he’s not predicting a crash. He’s forecasting something that could be even more painful – and last even longer – than a crash. [Click here for all the details – including his unique solution.]( -- The Haves and Have-Nots Take a look at the table below: The table shows a breakdown of the Nasdaq 100 constituents segmented by their month-to-date returns. As of Wednesday’s close (excluding Meta’s earnings rip), only 31 of the Nasdaq’s 101 stocks have been up this month… averaging a 3.5% gain, compared to an 8% average loss for the other 70 names. The most striking factor differentiating the haves and have-nots this month has been the size factor. The market has been moving into the perceived safety of the big caps… The first impulse of market breadth analysis, especially when it’s been so lopsided toward the big caps, is to assume that the stocks with a low price-to-earnings (P/E) ratio have been doing well relative to the overpriced names… That has not been the case. They’re actually all overvalued, at around a 27 P/E multiple on average… What the market has really been doing, at least when it comes to the Nasdaq, is selling growth, not multiples… which means there’s a major lack of confidence in the market’s growth prospects. The 70 stocks that have been down this month have a 13% sales growth estimate, compared to a growth rate of 8% for the 31 April winners. This kind of rotation is not a green light for the economy… Rather, the market has been stealthily selling off high-growth expectations for the safety of size… And hiding in plain sight. [Viral Trading Secret Exposes: "America's #1 Retirement Stock"]( Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. It’s All About Market Cap In a bull market… High-growth stocks are exactly the ones that outperform, and we have been seeing the exact opposite lately. The reason the market isn’t much lower is solely due to the weighting that just a few large-cap names have in the index… and much less about future economic prospects. Segmenting the S&P 500 yields similar results… with 188 of the 503 stocks up in April, averaging 3.4%, while the 315 that were down losing 6%. Again, it seems to be all about market cap… with the average stock that’s up at around a $97 billion market cap compared to $61 billion for the ones that have fallen. As you can see, performance has been more or less even in terms of valuation and growth when it comes to the S&P 500… Only the market-cap factor stands out, which has to do with the general value orientation of the index itself. Next week will see two back-to-back central bank announcements… one from the Fed on May 3, followed by the European Central Bank the following day. An additional 25-basis-point hike seems like a lock. The question will be the market’s reaction after the fact. But one thing is certain… Despite the market’s strength, below the surface, a tectonic shift is underway. Regards, Eric Shamilov Analyst, Trading With Larry Benedict IN CASE YOU MISSED IT… [The #1 Stock of 2023 (Trader Makes Fortune During 2008, 2020, 2022)]( I’ve joined the ranks of the top 1% of wealthy Americans... by [IGNORING 99% of the entire stock market.]( I only trade ONE stock, helping me nail OVER 800 winning trade recommendations! 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