4 IMPORTANT STRUCTURAL CHANGES TOOK PLACE IN THE MARKETS LAST WEEK
Structural changes took place in the markets this past week that are of note:
1. The Nasdaq 100 asserted its leadership role and left no doubt that the relative strength it enjoyed during the past several weeks was deserved. Any rally worth participating in over the past 15 years has been led by tech.
2. The semiconductor sector was one of the strongest sectors in the market over the past week. This is key to the rally in technology. Given the "clearance" the SOX enjoyed over its previous range, it is fair to assume that the rally is legitimate. More details to come in the weekend chart review later.
3. Massive intra-day and often downside volatility of the past several weeks turned into primarily upside volatility. This is a definite change in the attitude of the market. We have experienced countless last hour sell offs over the past several weeks. The intra-day volatility, both to the upside and downside has been frustrating. This week we saw very little intra-day volatility and fewer in the way of last hour sell-offs. This is a change in character for a market that has had severe multiple personality disorder since August.
4. Commodities have faded to the background instead of asserting their role as a leader of the current rally. The new uptrend in the US Dollar dramatically shifts the landscape of established relationships between the various asset classes. I would like to see commodities rally alongside equities as this what I have grown comfortable with over the past couple of years. However, it is important to keep an open mind and realize that the US Dollar is THE foundational support for the established patterns that exert themselves in the macro world. A change in trend for the US Dollar will therefore shift the patterns into temporarily unrecognizable mush. Commodities may fall into this mush for the time being.
