We are only three days into the fourth quarter of 2018 but it has been a very eventful three days. We started off with a very aggressive rotation out of small caps and mostly into Dow Jones. The disparity in the performance between the DJIA and the Russell 2000 ETF (IWM) was at record levels.
That rotation cooled off Wednesday but a huge rotation out of bonds took it place. Equities held up relative well in view of the sharp spike in interest rates but early gains were given back and the S&P 500 closed flat.
For years the bears have predicting that higher interest rates would put an end to this market uptrend. The technical action in bonds today certainly suggests that rates are breaking higher and will continue to trend upward but stocks were pretty sanguine about it. The crazy rotational action has caused some chaos and probably helped to deflect some of the pressure caused by rates.
A few big cap names such as Apple (AAPL) and Boeing (BA) are lifting the indices but the FANG names have made new highs in a while. The big cap momentum names are sluggish as well but that is being covered up by the indices too.
The monthly jobs report is due out on Friday and that will take on some additional significance with interest rates breaking higher. A "hot" jobs report is going to stoke inflation fears and may finally start to cause a little concern.
It has been very chaotic action over the last three days but it hasn't produced any major shift in the market trend. What we have is a high level of confusion and some added concern that maybe interest rates might start to become a headwind.
Have a good evening. I'll see you tomorrow.