Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

September 27, 2015 | Whole Lotta Bear Markets Goin’ On

John is author or co-author of five books, including of The Money Bubble, The Collapse of the Dollar and How to Profit From It, Clean Money: Picking Winners in the Green-Tech Boom and How to Profit from the Coming Real Estate Bust. A former Wall Street analyst and featured columnist with TheStreet.com, he currently writes for CFA Magazine.

The Dow and S&P 500 have fallen by around 10% since August, which in normal times would be hardly worth mentioning. But below the surface, in what used to be the market’s hottest sectors, much more serious damage is taking place.

Biotech, which had an epic bull market during the era of QE and the Affordable Care Act, had begun to crater even before Hillary Clinton proposed price controls for pharmaceuticals. Last week it went straight down.

Biotech ETF

Solar stocks had a quiet bull market that accompanied the technology’s emergence as heir apparent to fossil fuels. But now they’re quietly crashing:

Solar ETF

Junk bonds, which are essentially the equities of highly-leverage companies (because they turn back into equity when the bonds default and reluctant creditors are forced to take ownership of the junk issuers) have tanked in the past few months and are now far below their 50 and 200-day moving averages.

Junk bond ETF

One group that isn’t plunging is the gold miners. But that’s mainly because they had their crash while everything else was still rising, and are now at historically cheap levels. Here’s an ETF that tracks the junior gold mining stocks:

GDXJ Sept 2015

What does it mean when several high-flying sectors crash all at once? If history is still a reliable guide (a big if in today’s manipulated world) it means the internal structure of the market is deteriorating much more quickly than the behavior of the Dow and S&P 500 seem to imply.

When stocks in general catch up to the carnage in yesterday’s hot sectors, we’ll get something a lot more extreme than a simple correction. And when that happens the odds of the Fed raising US interest rates drop to zero.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

September 27th, 2015

Posted In: Dollar Collapse.com

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.