Great post by Gary Morrow (@garysmorrow) on the positive outside day day in the Dow yesterday, versus the downside outside day Monday in the NASDAQ 100. That's a very ominous sign.
The expectation was we’d see more selling in the NASDAQ and NASDAQ 100 yesterday and it didn’t happen.
Morrow highlighted Caterpillar (NYSE:CAT) yesterday, so using the technical chart, a peek was taken at the 5 and 10-year returns of CAT versus the S&P 500:
5-year chart:
10-year chart:
What surprised me is that with CAT not having made a new all-time-high since January 2018, and then seeing its stock price cut almost in half by March 23, 2020, the stock’s performance versus the SPX has actually fared well.
Yes, CAT’s underperformed versus the key benchmark, but just barely. (Be sure and look at the “average, annual” returns at the top of the chart.)
Summary / conclusion: CAT hasn’t been owned in years in client accounts, but reading Morrow’s note, and looking at the relative returns and wondering if the outside day on Monday, June 13th, 2020, means that Tech maybe won’t “crash” but will start to give up some its relative strength, perhaps it’s time to look harder at “value” and other themed plays.
Morrow is a good technician. Be sure and give him a follow on Twitter and LinkedIn (NYSE:LNKD) LinkedIn.
Take everything you read here with a healthy skepticism. Think for yourself based on your own idea of risk. Sometimes ideas work right away, and sometimes not at all. Sometimes capital market conditions change so very quickly.
A lot of what is written here is a way of thinking out loud and putting thoughts to paper.