Monday Sector Strength
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Barchart.com headline this morning: "China's Shanghai & Shenzhen 300 index today closed -4.3% after China's central bank chief Zhou Ziaochuan said that China's stock market may be overvalued and hinted at higher interest rates. The other Asian stock markets showed less severe declines". I don't like the prospects for US equities if China corrects while US stocks are technically overbought and investors are focused on mortgage problems.
Changing topics, Bespoke has a good analysis of sector strength worth a look. The dk-report has a very thorough weekend analysis of the market. Also, NYSE short interest was reported last week at record highs which is the opposite of what is generally expected with a strong stock market. Perhaps the current short interest is more a reflection of rate fears. If anyone has any thoughts to share about the short interest, or any sites with worthwhile comments, please forward them to me.
The bank index looks weak and is a concern for the market. The combination of higher rates and mortgage problems is killing this index. Strong financials is generally important for a healthy uptrend in stocks.
Below is the broader weekly view. There was a similar period of Bank weakness in late 2005, but the index retested the lows of its uptrend, and the index went from laggard to leader until early this year.
