Stocks broadly declined yesterday, although the Dow (DIA) fared slightly better than the other indices.  Only declining 0.71% in yesterday’s session—versus a 0.98% decline in the S&P 500 (SPY) and 1.72% loss for the Nasdaq (QQQ)—DIA is now the only major index ETF that is still overbought and the only one to be up from this time last week.  All of the other index ETFs have fallen off of overbought levels from the past few weeks and currently sit at neutral.  Granted, most of this movement still leaves the ETFs on the border of neutral/overbought so it will not take much upside for a return to overbought. With this fall to neutral, all of these ETFs are also down over the past five days with losses ranging from a very small 1 bp decline for the Core S&P 500 (IVV) to a much more substantial 1.86% loss for the Russell 2000 (IWM).  IWM is not alone in large losses though as other small and mid caps also have lost over 1%, also bringing them below the 50-DMA as well.  Start a two-week free trial to Bespoke Institutional to access our interactive Trend Analyzer and much more.

Recently, there has been a steady rotation into more defensive sectors, but in the past week this picture has become more mixed as the distinction between cyclical/counter-cyclical performance has muddied.  The second best performing sector this year has been Real Estate (XLRE) with better than a 20% gain YTD but in the past week, XLRE has underperformed dramatically losing 1.72%.  After sitting at extremely overbought levels last week, it has fallen sharply in its trading range and is now neutral like six other sectors.  While no other sector experienced quite as large of a decline, there are four other sectors (all cyclicals)  that are lower versus last week including Financials (XLF), Communication Services (XLC), Consumer Discretionary (XLY), and Technology (XLK). Each of these also sits in neutral territory along with Industrials (XLI) and Energy (XLE).  XLE has been the only sector ETF to sit below the 50-DMA recently, and given this more oversold level, the sector has begun to be bought up rising 1.1% in the past week. While XLRE has fallen, there is a disconnect with other defensives—Utilities (XLU), Staples (XLP), and Health Care (XLV)—which have done well.  XLU, XLP, and XLV in addition to Materials (XLB) have all outperformed the other sectors in the past week.  Additionally, these four are the only sectors that have become overbought with XLV sitting just below extreme levels.

Whenever old socks start to lose some of their elasticity and won’t stay up anymore, they’re called quitters, and looking at a recent chart of the Philadelphia Semiconductors Index, otherwise known as the SOX, it too seems to have come down with a case of the quitters.  Ever since initially falling below its 50-day moving average back on May 13th, bulls have made multiple attempts to pull up the SOX, but each time gravity has taken over.  This morning’s rally in the semiconductor space, driven by Micron’s (MU) earnings report, marks the 4th attempt by the SOX to retake its 50-DMA in the last six weeks, but that early strength has given way to some modest profit-taking.  There’s still a lot of time left in the trading day, though, and breadth for the semis is very strong today.  Therefore, there’s still a chance that the group manages to rally back to its earlier highs, but a fourth unsuccessful attempt wouldn’t be very encouraging. Start a two-week free trial to one of our three membership levels to stay on top of all the economic trends and developments.

Consumer Confidence for the month of June missed expectations by a mile this morning as the headline reading dropped from 131.3 down to 121.5.  That 9.8 point decline is tied with last December for the largest m/m decline since August 2011.  Not only was the decline notable, but the magnitude of the miss relative to expectations (121.5 vs 131.0) was the largest since June 2010.  While headlines surrounding trade and Iran can understandably hurt sentiment, the fact that the stock market was bouncing off the June 3rd lows during this period and had no positive impact was notable.  This month’s reading in the headline index of the Consumer Confidence report was also the lowest since September 2017 and only the fourth period since the Financial Crisis that the index dropped to a 52-week low.

In terms of the breakout between Present Situation and Expectations, both indices saw similar declines in June.

With both indices seeing similar declines, the spread between the two was little changed and remains extremely elevated and at levels that have typically been seen leading up to recessions.

While the spread between Present Conditions and Expectations is worrisome, the percentage of consumers responding that jobs are plentiful didn’t see as large of a decline, falling from 45.3 down to a three-month low of 44.0.

Finally, while there may not have been much of a decline in the percentage of consumers viewing jobs as being plentiful, young consumers have seen a sharp drop in confidence levels.  While we saw across the board declines in confidence by age group, consumers under the age of 35 have seen the sharpest declines falling to the lowest levels since May 2016.  Start a two-week free trial to one of our three membership levels to stay on top of all the economic trends and developments.

After winning the 90s by having its Windows operating system on the large majority of PCs, Microsoft (MSFT) experienced a lost decade in the 2000s.  From its peak in December 1999 to its trough in March 2009, Microsoft (MSFT) fell 75%!  Throughout the 2000s, “Mr. Softy” as it was called was considered “dead money,” and it was all but forgotten by momentum and growth investors.

If there was an award given out for “Comeback Stock of the Decade,” there’s no doubt that MSFT would be an odds on favorite for the 2010s.  After missing out on search and social media, MSFT hit a homerun with its transition from a traditional software company to a “software as a service” (SaaS) cloud company.

The long-term price chart for MSFT is something to behold.  While the stock experienced bigger gains in percentage terms during its run in the 1990s, its sheer price move this decade totally dwarfs the 90s move at this point.  The point at which MSFT really took off was after it finally broke above its 1999 highs back in late 2016.  This is one of the best examples you’ll find of a breakout from a long-term base.

Since its Financial Crisis low in 2009, MSFT’s price has moved up 809%.  Since breaking out above its 1999 highs in late 2016, the stock has more than doubled with a gain of 131%, making it the largest company in the world once again with a market cap of $1.06 trillion!

Unfortunately for those that missed out on MSFT’s epic comeback decade (which is most investors), the chart below is certainly not one you would want to go out and buy right now!  You certainly can’t make the argument that you’d be “buying low.”  Start a two-week free trial to one of our three membership levels for access to our premium research.