Overall, US Stocks performed well, but the narrative is changing, which could indicate the final big wave is underway.

The leadership shifted to big cap Dow stocks +2%, inflation plays, and value stocks.

Volume patterns are confirming the shift in spades as both the Dow Industrials and the S&P 500 are showing good accumulation.

What was leading, the Nasdaq100 (QQQ) closed down -.4% for the week, and now has 5 distribution days over the past two weeks.

Could it be that Mr. Market believes, that with interest rates on the rise, the Fed will be more cautious going forward on additional bumps and not derail the bull market, hence getting behind the curve on inflation?

Here is another factoid; value stocks are on the verge of taking out a decade-plus long downtrend versus momentum.

Plus, value has turned positive on a short-term time frame. We have been stalking this for quite some time and have mentioned it here in this column back in August and in Mish’s daily column back on June 12.

Funny thing is that this week Mish and I were at a dinner party with some very sophisticated business people who were discussing their portfolios. One, a real estate developer, tired of losing, has completely given up on gold thinking it has become a yellow relic, while another correctly observed that it now takes 22 ounces of gold to buy one measly share of the Dow and is still a believer.

The historic perspective of the value of Gold vs. the Dow can be seen below (compliments of Barron's and Bloomberg, September 23, 2018)

We believe in the truth of the charts until proven otherwise and at the moment Gold Miners, which are most sensitive to underlying gold prices, are looking like a bottom.

Along the same vein of throwing in the towel at just the wrong time; the death of value stocks was proclaimed just recently by several leading economists and leading hedge fund players… hmmm.

The highlights of this week’s market action are the following:

• The Dow Industrials made new all-time highs +2%
• ($) Value Stocks are on the verge of an important breakout
• ($) Foreign equities including commodity sensitive emerging markets might have bottomed
• US Small Caps closed down -.4% for the week which indicates (counter-intuitive) a trade war with China will impact domestic companies
• ($) The dollar weakened while the Euro confirmed a positive phase change which is a positive for commodities
• ($) Metals, both precious and otherwise, specifically (copper) and Gold Miners (GDX) look to have bottomed