The stock market opened on a strong note before ceding ground during the day and closing lower. This may looks like a one day reversal pattern that needs to be confirmed over the next few days. Breadth settled on a weak note with 958 stocks closing up and 1964 finishing lower. Is the long waited correction starting? Time will tell.
Our readers will find attached the chart of the Dow  Jones Utility Index that has lost already 12 % since the highs reached on the 15th november 2017. At this stage of the economic and financial cycle, it is interesting to follow this index that, historically, is a good leading indicators of the future trend of interest rates. In this case, the market is anticipating an acceleration of the economy and and adjustment of the yield curve to the upside. In periods of interest rate adjustment and normalization of the monetary policy, volatility comes back into the stock market and large sector rotation occur towards cyclical, industrials and sensitive to the economy stocks. The period we may enter may be similar to 1984 and 1994, the main risk is clearly in the bond market.