A very strange market
It certainly isn’t easy coming here week after week warning people the market can hit a wall at any time while seeing it go up day after day. While I haven’t urged you to be short, I have basically told people to trade this market with one eye in the back of the head.
Some of you know as part of my work I do an Australian update. Lately Australia has been a better market like so many others. They had a brutal bear phase which basically led the world down; they started dropping even before China. Some of you may recall I referenced the big RBA rate cut in May because their market dropped on the news.
Last week supermarket Woolworths had a major disappointment in earnings. The stock got crushed and took the whole Australian Consumer Staples sector with it as you can see. It almost looks like a crash, doesn’t it? One Australian financial website called Australian Financial Review Magazine actually called it a crash because it was down 9.8%.
Of course, the rest of the ASX didn’t come in like this but you may have guessed sequences like this are not common in really good markets. Then again, sales in a food store are not supposed to drop 35% in a good economy. If this were an isolated incident I doubt the entire sector would’ve been crushed.
But we have our own problems. Last week the Transports got hit again with a special assist to Jet Blue which supposedly had decent earnings but guided poorly. As you can see the Transports retreated from an important trend line which has contained this move since April.