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“A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses.” – Edwin Lefèvre, Reminiscences of a Stock Operator
US equity futures are currently down pretty significantly (-0.80%) after major indices fell more than 1% yesterday. The declines are being led by the Energy sector, which has already fallen more than 6% over the last week.
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Breadth had made a bit of a turnaround earlier this month, but the last week has been brutal with investors really selling the cyclical sectors that are dependent on a strong economy. While the cap-weighted S&P 500 is less than 2% from all-time highs, the average stock in the S&P 1500 index (made up of large-caps, mid-caps, and small-caps) is 15.8% from its 52-week high. As shown below, the average Energy stock in the S&P 1500 is more than 30% from its 52-week high, while Communication Services stocks are down an average of 21.4% from their highs. The defensive Utilities sector has held up the best with the average stock just 6.1% from its 52-week high.
It’s been a choppy summer for stocks even though things look positive at the index level. As shown below, over the last three months, the cap-weighted S&P 1500 is up 5.9%, but the average stock in the index is actually down 0.65% over the same time frame.
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