“When the facts change, I change my mind. What do you do, sir?”
–John Maynard Keynes
Last week’s takeaway was the dumping in certain of the speculative growth stock glamours. Otherwise, at the surface, shares had a productive week as they continued their climb out of the previous week’s selling. The below chart shows price falling short of the previous high at “A.” We would not read too much into this.
The important level is the July 12 low of 2837, signified by “B.” Should price take out this level on an intraday basis, the intermediate-term trend would shift from up to down.
The greater number of defensive, low-expectation titles that comprise the S&P allowed it to print a new high last week, confirming its medium-term trend.
However, even in the blue-chip averages there is a semblance of decay.
Secondary indicators move in the wrong direction. The yield on 10s scraped a new closing low Friday of 1.46%. The euro hit a two-year low vs the buck.
The backdrop also worsens. Friday, Spanish 10s went from 7.01% to 7.27%, a new Euro-era record. As for Greece, its time is running out, and an exit from the euro seems inevitable.
Last week’s action in first-cabin growth stocks speaks. Chipotle Mexican Grill (CMG), Whole Foods Market (WFM), Intuitive Surgical (ISRG), Monster Beverage (MNST), Vivus (VVUS), Synacor (SYNC), and Sally Beauty Holdings (SBH), showed their true color, as is seen below.
In summation, despite the uptrends in the major averages, last week’s loud breakdowns in a number of leading growth stocks tells the whole story. The speculator who operates in the intermediate-term should be in a full cash position.