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Real Time Insight

The relative performance chart below, which I constructed on the fantastic and free StockCharts.com, describes the market landscape of the past month in several interesting ways.

I will break it down after you take a look, but note that the blue bar next to AAPL is the ETF TLT, a proxy for the US Treasury long bond, and "Cyclicals" is the Consumer Discretionary ETF, XL
Y. And I only picked AAPL as the only single stock because I think it is representative of where big money can hide and ride out a storm.



What stands out are defensive sectors like Utilities and Consumer Staples leading, with the laggard Energy finally catching some money flow into summer and geopolitical worries. Obviously the growth areas lag, represented by small caps, the Nasdaq, and Financials.

I included the NYSE because it was one of the better looking charts just like the S&P 500 and the Dow. But that is just part of the same theme of the flight to safety in big caps.

About ten days ago, I said this market would show its hand in the next "3-7 sessions" about whether it could bust out to new highs, with the big caps dragging the growth indexes along for the ride.

I thought we got an all-clear sign after the market didn't fall following an awful GDP print and another FOMC taper notch. Instead what we got was more muted action after a great jobs number and revisions that took the "worst winter ever" to an NFP average of 214k jobs vs last year's 194k.

And if there's any doubt about how long the flight to safety by money managers has been going on, here's the 3 month view of the same chart. Except for bonds playing catch-up a lot recently, these trends have been in force for some time.



This is where money goes when institutions are in "distribution" mode and getting out of growth stocks. It's not a pretty picture and seems to argue for more corrective action before their risk appetite returns.

And while it is typical of what happens at the end of the "best six months" (Nov-April), I thought we would see a shift back to "risk-on" investing this week during another good enough earnings season.

I actually thought it could be "Buy in May" this year. But these persistant signs are troubling, especially when there was little spark for them to reverse after that jobs number.

What say you? Is the writing on the wall above likely to reverse as money managers find bargains in growth, or is the path of least resistance still lower until the bargains get better?

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