[ad_1]
Here are the takeaways from today’s Morning Brief. sign up Every morning you will receive the following message in your inbox:
Large-cap tech stocks rose for a fifth day in a row on Wednesday, hitting yet another all-time high and extending their lead over the broader market.
Many investors remain skeptical about this year’s rally, as a small number of technology-focused stocks once again account for nearly all of the S&P 500’s returns. There are many comparisons to the boom and bust of the dot-com era.
To be fair, we’ve never seen tech stocks this high relative to the broader market, as seen in the chart below that tracks the ratio of large-cap tech to the S&P 500. do not have. When it comes to finance, how you got to such a high level is much more important than the level itself. Pace and direction take precedence over elevation.
Smart chartists and technologists can point to a 20-year cup-and-handle pattern that has recently turned upward. (The cup is U-shaped, and the handle is a steep drop after the top of the “U.”) In general, the larger the base, the larger and longer the breakout will be.
For skeptics and those new to the dark arts of technical analysis, human behavior manifests itself in the creation of repeating chart patterns across stocks, bonds, indices, and every conceivable combination thereof.
“Buy low, sell high” is a long-standing mantra on Wall Street. So it’s no surprise that bottom investors are trying to buy new lows and permabears are trying to sell new highs. The former will be crushed in a bear market, and the latter will be slaughtered in a bull market.
Suffice it to say, when it comes to investing, human nature tends to show itself at the worst times. Many investors let fear control them and end up selling their winnings or shorting the market completely during bull market peaks. Investors, on the other hand, are tempted by greed to buy stocks that become cheaper during bear markets.
And it pays to be cautious about these factors when considering what investors should do. History does not guarantee that bullish patterns will repeat. But, combined with what my colleague Julie Hyman pointed out in Tuesday’s Morning Brief about a sustained but narrow bull market, this means for skeptical investors that a small number of This is another data point to examine the discomfort with the stock market being driven by the market.
Click here for the latest stock market news and in-depth analysis, including price-moving events
Read the latest financial and business news from Yahoo Finance
[ad_2]
Source link
