This Market Is Hostage to a Handful of Stocks

"When the bough breaks..." [Logo]( Weekly Market Update Today is June 9, 2023 Dear Reader, Hello again and Happy Friday! Apparently Canada caught fire earlier this week – deucedly inconvenient. The wind blew the resulting smoke southward until it covered 13 U.S. states, including my home state of New York. Bill Spencer Editor-In-Chief True Market Insiders Since Tuesday (6/6), my Queens neighborhood has smelled like a campfire and the air has looked like yellow stained glass. According to Bloomberg, “NYC air quality returned to ‘moderate’ for the first time since Monday, though conditions remained ‘unhealthy’ in Richmond, Raleigh and elsewhere along the east coast.” If you have any friends or family up in Canada, will you ask them to please put the fires out? Thanks! The mainstream financial media has been blowing some smoke of its own. Here’s a typical headline, this one from CBS News… And here’s one from the fine folks at MarketWatch… And one from the Associated Press… My favorite headline is the one that asks, “Will Big Tech’s rally finally spread to the broader stock market?” That’s like asking, “Will victims of Swine Flu finally pass it on to the pigs?” In other words, the headline has the cart before the horse. The real question is: Will the weakness in the broader market pull the indexes lower.” If you’ve been reading True Market Insider these past several weeks, that question should sound familiar. I wrote about it on Monday ([“Can This Market Take a Punch?”](. And Chris Rowe had more to say about it on Tuesday ([“This Market Prediction from Apple Suggests a Sharp Decline”](. In a nutshell, the stocks of a handful of giant tech companies – Google, Apple, Meta, Microsoft etc. - have been moving higher. And thanks to their huge market caps, they have an oversized effect on the cap-weighted major averages. So if all you look at are those major averages – the “external market” – you’d think that the market as a whole was in great shape. This is especially true if you look at the tech-heavy Nasdaq. This point – that a few tech companies are pulling up the averages against a backdrop of weakness – is so important to understand that I’m going to indulge in a thought experiment. First, a little background, and then we’ll do our little experiment. Imagine you’re a subscriber to Sector Prophets Pro, our sector research and data platform. As such, you have access to a set of indicators called “Bullish Percent Index (BPI)” charts. These charts let you see at a glance what percentage of stocks in a particular “universe” are trading on Buy signals on their own price charts. The more stocks on Buy signals, the stronger that universe of stocks. You can make a BPI chart for any group of stocks. One already exists for the Nasdaq Composite. Here’s the experiment… Imagine it’s April 18, and you decide to look at the BPI for the Nasdaq. Here’s something very close to what you’d see. The chart has just flipped from a (short-term bearish) column of O’s to a (short-term bullish) column of X’s. So far so good. (The new X-column is at the far right of the chart. The ‘4’ stands for April.) Now, you put away the Nasdaq BPI, and you begin watching the news and looking at the major averages. You hear again and again that “technology is strong.” And you hear story after story about Nvidia, Tesla, and other tech names. Fast forward to this past Wednesday (June 7). You see that the Nasdaq has gained +10% since April 18, when its BPI flipped to X’s. Nice… You revisit the Nasdaq BPI, perhaps expecting to see a much taller column of X’s than the one that you saw on 4/18. That’s a reasonable expectation, right? After all, the Nasdaq has gained 10%. But when you look at the BPI, you see this. (The ‘6’ stands for June.)   14-Year Fox’s New Veteran and Wall Street Titan [reveals proprietary trading system]( on air for the first time in his 30-year career. Remember, timing is crucial when it comes to seizing opportunities in the market. [Do so now](.   In the 50 days since April 18, during which time the Nasdaq gained 10%... And Apple gained 11.65%… Meta gained 27.9%… Microsoft gained 18%… Amazon gained 25.5%... Tesla gained 36%... and Nvidia gained 53%. The Nasdaq BPI managed to add just one additional X-box to its current X-column. Each box represents 2% of stocks on Buy signals. You might have expected the chart to fill five boxes (2% times 5 = 10%). Perhaps more. But only one additional box got filled – in 50 days. Does that seem like a strong group of stocks? I began this exercise with the Nasdaq BPI because, again, the Nasdaq is overweight in technology stocks, and tech is what’s getting all the attention and getting investors all excited. We just saw that when we look under the hood of the index, there’s much less participation in the current “rally” than you’d expect. Hardly any stocks are moving to Buy signals. So you don’t think I’m picking on the poor old Nasdaq, here’s what the New York Stock Exchange Bullish Percent Index (NYSE BPI) looked like on April 3rd, the day it reversed from a column of O’s to a column of X’s. Like the Nasdaq BPI, it formed a column of three X-boxes. (Remember, the ‘4’ means ‘April.’) Between April 3 and June 5 the S&P gained about 5%. Here’s the current NYSE BPI. Like the Nasdaq, it has managed to fill just one single X-box in 63 days. Does that look like a strong market to you? So again, here’s the question. What happens to the market when these few high-flying tech stocks reverse lower?   No matter what happens to tech stocks or to the stock market… There will always be opportunities to flesh out your trading account. You just have to spot the juiciest, potentially longest-lived trends… And then find the [stocks best poised to ride that trend]( (usually micro- and small-caps). Tobin Smith is the undisputed master of this particular style of profit-making. He’s also very angry about the financial injustices faced by ordinary people… and [he’s on a mission to do something about it](. Tobin sat down recently with True Market Insiders’ Investor Advocate Brittany Cascone. Not to vent – but to offer solutions to the crisis currently faced by American Main Street investors – especially retirees. [Click here to hear Tobin’s solution>>](   As always, thank you for your time and attention. See you next week. Bill Spencer Editor-in-Chief, True Market Insiders   [I’ve Teed Up a Potential 295% Win for You]( [As Congress Fiddles, The Stock Market Burns]( [Transform Your Retirement by Riding the A.I. 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