Stock market volatility is increasing.
The stock market has now fallen another week and that decline sped up a bit as shares of NVDA fell 10% on Friday. Remember, last week, it was JPM that posted a tear drop decline after it reported earnings. Now NFLX did the same thing too after it said that it was going to stop reporting the number of pay subscribers it has on its platform.
Take a look at it’s chart.
And here is NVDA.
Do you remember how everyone was talking about the “magnificent seven” stocks as we came into this year as the seven big cap tech stocks that you had to buy, because their market caps all dominated the S&P 500 and Nasdaq? Well, now many of those have rolled over. Shares of TSLA and AAPL have been trading down all year, but now the NFLX chart is broken too.
When market leaders break down in a bull market it is a big warning sign.
There is a saying when the stock market generals get shot then watch out.
Also, aren’t stocks supposed to have excitement during earnings season?
Last week’s decline in these stocks helped to create the biggest weekly market cap market loss in stock market history.
That’s a testament to how far these stocks went up and how big their market caps became.
Here is a chart of the Nasdaq.
The Nasdaq isn’t really that far from its 150 and 200-day moving averages now.
Is this a mere market correction or the workings of a major top?
Last year, as you can see, the Nasdaq fell to its 200-day moving average.
At that point, the number of stocks on the NYSE above their 200-day moving averages fell below 30%.
That number is now at 60%.
However, stage three topping phases typically come with an increase in market volatility and a flattening out of those long-term moving averages.
That very easily could be what is starting now.
They also come with it a faltering in the stock market leaders and a rally back up to either minor new highs or one that fails.
That rally, though, comes with very weak market breadth and a deterioration of various internal indicators for the market.
That is the key tip off that the bull market is really over, so we’ll watch to see how it all unfolds over the next few months.
Meanwhile, the actual price volatility for gold and silver is actually shrinking.
Remember, the week before last brought with it a Friday “key reversal” day for gold, which made it look like a correction could come in the precious metals markets. In fact, many bullish gold gurus were worried about a drop down to $2200 on gold.
I was thinking it could go sideways in a 100 point range, but it barely fell at all and is just sitting around $2400.
When you see a market breakout and have a big run and then trade with really low volatility you are seeing a very powerful trend, with a lot of underlying buying going on. With gold, that buying is not happening in the United States, where small investors have zero interest in precious metals, still captivated by crypto gurus and technobabble talkers, like Cathie Wood, but it’s going on all over the world.
Gold actually made a new weekly closing all time high on Friday and silver too finished the week at a new 52-week high.
The move in copper, and the BCIM ETF, which I own a position in, has also yet to stop.
Inflation is not going away when copper prices go up like this.
Gold, silver, and commodities are the place to buy now.
The market action of the past two months has been telling us that.
What you want to do is avoid in investing in sectors or ETF’s that are falling worse than the market averages have and are already trading below their 200-day moving averages, because they are likely to lead the market to the downside when the next bear market does actually come.
That’s the case of Cathie Wood’s ARKK ETF.
ARKK is sinking.
But now the rats are jumping ship too.
Tesla announced it is laying off 10% of its global work force last week and several of its top executives, including its top engineer resigned.
He had been with the company for 18 years.
TSLA stock actually lagged the S&P 500 after the stock market turned back up last October.
It lagged on the market rally and lagging action is often a warning to future price drops.
And it happened in TSLA stock, in the last two months of the year, and this year it has been one of the worst stocks anyone can own.
Be wary of any other stocks, sectors, and ETF’s lagging the market so far this year.
-Mike
