There was a time, prior to early 2016, when most of the market indexes were moving in sync. However, in early 2016 the market’s leadership narrowed somewhat. The driving force for the markets became more dominated by technology companies and semiconductor stocks. If you look at the charts below you can see where tech has been outperforming the broader S&P 500. The S&P 500 is in light blue, as a comparison, and you can clearly see the techs outperforming the broader indexes.

The S&P 500 peaked on January 29th of this year and has been going through a consolidation ever since. In order to test its previous low, the S&P 500 would need to correct another 4.5%.

The semiconductor index, on the other hand, peaked on March 13th of this year. This most recent correction for the semiconductors has been greater than for the broader market. To test the most recent lows in the semiconductor index we need a much smaller decline. Perhaps the indexes are trying to get back into sync? What had been strong is weaker and what was weaker is stronger.

The semiconductor index has moved like a rocket ship, perhaps a correction is not a bad thing. If anything it should create a bear story going forward.

I’ve been suggesting that the markets will be volatile and that we are in a consolidation phase. I believe that this will continue. I think that the media focus may return to interest rates since we just saw the 10 Year Treasury Yield hit new highs. If you’re looking for a reason for a further correction here it is.

The potential still exists for much higher markets, it might just take some time getting there. The trend remains your friend.

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