The Gilmo Report

October 21, 2018

October 20, 2018

The NASDAQ Composite Index is the weakest-performing of the major large-cap indexes by virtue of its -10.56% peak-to-trough decline that hit a near-term low last week. This contrasts with the peak-to-trough declines of over -7.83% and -7.61% in the S&P 500 and Dow Jones Industrials Indexes, respectively. After a natural reaction rally early in the week, the NASDAQ ended its third-straight down week Friday on a reversal back below the 200-dma on roughly even volume.




Even weaker, however, has been the small-cap Russell 2000 Index, which logged its lowest closing low since topping on the last day of August. It is also sporting a peak-to-trough decline of -12.12%, leading all comers. The relatively weaker performance in the NASDAQ and the Russell makes perfect sense within the context of my contracting P/E theory as the driver behind the current market correction.

Given that most of the huge P/E expansions we’ve seen have been most egregious in the tech and growth areas of the market, those indexes with the greatest concentration of these stocks have suffered the most. No surprise there.

The rest of this report is available for Gilmo Report Members only.
The full report will be available 45 days after it is posted. For immediate access: login or subscribe

Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2018 Gil Morales & Company, LLC. All rights reserved.