Dive in Momentum Stocks Resumes: Nasdaq Takes a Hit, Rotation Into 'Safe' Sectors Continues

On Friday momentum stocks sold off with some verve again after the release of the payrolls data. Since the latter were actually quite close to the expected number, they cannot really have been the trigger of the sell-off (in other words, it would probably have happened regardless of the data). A few weeks ago, Charles Biederman of TrimTabs warned that the upcoming tax season could lead to some selling, but there is also the presidential cycle to consider. If the market continues to follow this particular cycle model (it has actually done so year-to-date), it should decline from an April high into an October low. What makes the recent market action interesting is that there continue to be multiple divergences in evidence between different indexes:


Russell 2000 Index, NDX, DJIA and SPX – the former two have been in sync, but have diverged from the other indexes. There are many more intra-market divergences between different sub-sectors that have been put in place over recent months.  (more)

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