Rumblings Beneath the Market Surface

I hope to pursue this topic in greater detail shortly, but thought I'd start the ball rolling this morning. Since April 21, we are up in the Dow stocks to bull market highs. Since April 21, both the S&P small cap and mid cap stocks are down. For quite a while, we've seen smaller cap issues outpacing the big caps. Now, recently, we're seeing the reverse.

But it doesn't end there. *Within* the small cap universe since that April date, the value stocks are outperforming the growth issues. And within the mid caps, we're seeing the same dynamic.

In other words, we're seeing a flight to perceived safety: toward blue chips, toward value and away from more volatile, growth-oriented issues.

Might that have something to do with rising interest rates, rising energy prices, and a falling dollar? And might it account for the fact that, on a day where the Dow made a new high, we had 790 stocks making 20-day lows, compared with 930 making new highs? Or that more stocks are below their 7-day moving average than above? Hardly signs of broad strength.

More like a repositioning of assets. And it's not the repositioning you'd expect to see if investors were expecting a vibrant economy.

Methinks tectonic plates are shifting below the market earth.