By Graham Summers, MBA
Let’s talk about market structure.
The S&P 500 is extremely weighted towards technology stocks. Technology is the largest sector by weighting. In fact, it is greater than the weighting of the 2nd and 3rd largest sectors combined.
In other words, the S&P 500 is, in fact, largely a proxy for the technology sector.
Now, tech stocks are very sensitive to long-term rates. You can see this clearly in the chart below where the Technology Sector ETF ( XLK ) closely follows the price movements of the Long Treasury ETF ( TLT ), albeit with greater volatility.
I mention all this because the Long-Treasury ETF (TLT) is reversing again.
This suggests that the current rally in stocks is on borrowed time. Enjoy it while it lasts.
At the end of the day, the stock market can recover all it wants, but it will all be for nothing.
Because the Great Crisis has finally arrived… the one that in 2008 was a warming.
I’m talking about the crisis in which entire countries erupt.
Take a look at what’s happening with the British pound. LOW THIRTY YEARS OLD and dropping like a stone.
How about the Japanese yen…25 year lows with no end in sight!
Stocks are in the ground… just like before the tech crash, the housing crash… and now the everything bubble crash.
Meanwhile, smart investors are preparing for what’s to come…