Beware Last Week's Divergences

We've noticed some troubling divergences recently that bear scrutiny. Last week confirmed most of them, so it's time to beware.

First, let's look at the stock market. Having performed our monthly and weekly portfolio reviews the past two days, divergences that appeared last month have, for the most part, continued. The most striking: the Dow Industrials vs. theTransports; The S&P vs. the Financials, small caps, the VALUG (Value Line Index) the Advance-Decline Line - and others. The only divergence from last month that appears to have reversed was between the cap-weighted S&P Index (e.g., SPY) and the Equal-weighted Index. 

When various indices and/or sectors diverge, it means they're moving in opposite directions. For example, the Dow Industrials have been grinding up...

 

Now look at the Transports...

You see the divergence, right?

When the Industrials and the Transports go their own separate ways, something's up. And, not infrequently, we'll get a correction, typically in the index that's been heading up. It'll turn around, although the degree of the turnaround and the timing can't be pinpointed with microscopic accuracy.

All of which means we may soon see a stock market correction of some significant degree of intensity. Maybe not a crash, but you can't dismiss that possibility.

Divergences in the stock market are not uncommon. When we notice them, we respond accordingly. But we've been noticing divergences in an area that's not common: science.

If you've been following the "science" related to the "vaccines," you too may have noted some divergences. To simplify what we've noticed, it comes down to this: those who claim these so-called vaccines are "safe and effective," vs. those who express reservations. Each side claims they have "science" that supports their claims.

I understand what's behind divergences in stock indices. After all, as a professional, I should. But even if you're not a professional, it's pretty easy to grasp the what and why of such divergences. The charts above are a good example of something that anyone can access simply by accessing Stockcharts.com and knowing which index to chart.

But what do we who are not scientists do with these seeming divergences in science? While I've seen competing claims, different explanations of various observable phenomena, I always through such divergent positions by sorting through available evidence, undertaking new studies, etc. But apparently that's either an naive or benighted view, or science has somehow evolved into something new - something that now seems driven by money and politics rather than evidence and experimentation. As such, the "truth" becomes determined by whoever has the most money and wields the most power.

While I know what to do in response to divergences in the stock market, I'm not sure what to do in the face of the competing claims related to the experimental therapies - aka vaccines - that are being injected into people these days.

Do you?

One thing I do know, though, is that it's time to beware the divergences. They'll have consequences. And they may not be good.