By Graham Summers, MBA
Yesterday’s market action could not have illustrated the current market rotation any better.
As I recently outlined:
1) The S&P 500 is currently consolidating after one of its best monthly performances in 30 years.
2) This consolidation has consisted of large tech correcting while laggard sectors and indices (small caps/ the Russell 2000, industrials/ the Dow Jones Industrial Average) catch a bid.
Yesterday’s price action illustrated this perfectly: microcaps (the Russell 2000) caught a major bid relative to tech (the NASDAQ) as the Russell 2000 ROSE over 1% while the NASDAQ fell nearly 0.9%.
If you heeded yesterday’s missive you did quite well! Again, you CAN outperform the overall market, but it takes a lot of work and insight!
This trend is likely to play out over the next two weeks until the Russell 2000/ NASDAQ ratio reaches its 200-day moving average (DMA) sometime around the Fed’s next FOMC (December 12th-13th).
At that point the overall market should complete its consolidation/ correction and begin its next leg up. I’ve said previously that the S&P 500 will hit 5,000 sometime in the 1Q24. The setup is clear in the longer-term Cup and Handle formation.
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