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Technical Irrelevance: Sometimes technical analysis does not matter (Petr Pinkhasov quote this week), and I am a die-hard technician. That goes for fundamental work too in the current market environment where margin clerks could be very busy in a December month that they may not be accustomed to. With many caught mentally "offside" looking for a year-end rally institutions could be scrambling to unwind their previous stance, and that could further "unnerve" benchmarks. Of course, this applies to individual names more so as they can crater 30-50% where the indexes will lose 3-5%. Sure I am throwing numbers out there, but technical damage has been severe recently. Below is the chart of the Nasdaq as warning signs should have been put up with the big reversal on 11/22 with a bearish engulfing candle at all-time highs and quickly negating a bull flag breakout at the very round 16000 figure (our previous target originally in our 6/25 Technology Note). It held the 15000 number Friday, but the action has been wide and loose, hallmark bearish traits. I would have preferred tauter and less velocity in the move toward 15000.

David Versus Goliath: An abundance of chatter has been made about the consolidation within the small-cap arena. On a very general basis, the IWM has gone virtually sideways since February. In the consumer discretionary arena, there is some divergence occurring in regards to the larger cap, more top-heavy, XLY to the "smaller cap", more equal weight XRT. While the XLY is right at all-time highs and on a very impressive 4 week winning streak, the XRT trades 5% off its 2021 peak, and this week the difference was glaring with the XLY higher by 4.3%, and the XRT falling fractionally. TSLA, on a current 10 week winning streak, recently joined the exclusive trillion market dollar cap club (just 5 others including MSFT GOOGL AMZN AAPL and Aramco) by jumping 22.5% this week, it's second-best WEEKLY gain behind the 24.7% gain the week ending 1/5. Expect the psychological very round 1000 figure to be supportive going forward, if retested. AMZN recorded a 100 handle reversal intraday to CLOSE at highs for the session Friday after an ill-received earnings release. While the two aforementioned names dictate the vast majority of the action in the XLY do not discount how HD is doing, falling just 4 sessions in all of October. NKE and TGT, other top 10 holdings are quickly building the right side of their cup bases. The latter completed a handle Friday. Advantage large caps.

Relative Performance: Not surprising to see weakness on ratio chart against S&P 500 for the staples. It is the "worst" actor among the 11 major S&P sector groups up just better than 7%. The XLP is now 4% off most recent 52 week highs, and top component in PG could have ETF feeling heavy as chart is sporting bearish top pattern.

Relative Strength: XLU is the 10th best of 11 major S&P sectors on a YTD basis having advanced almost 10% YTD. The current 3-week winning streak has gained by a tepid 5.2%. Last week's 2.4% advance was the second-best WEEKLY gain in last 6 months. Has made back just more than half of the strong 4 week sell-off the weeks ending 9/10-10/1, many in above-average WEEKLY volume.

Relative Performance: Ratio chart below compared to S&P 500 makes it look like healthcare is having a tough year. Just the opposite with XLV higher by more than 17%, but that makes it just the ninth-best major S&P sector actor of 11. Not helping is that the XLV is just the 10th best of 11 on a one and three-month lookback period, basically UNCH during the time frame.