After the Fed, Here's Something Really Worth Fussing Over
What happened Wednesday likely wasn't on your bingo card. But what stands out to me is something else. Plus, these readings say to expect some decent downside.
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If I had told you that the S&P 500 would rally 46 points on Fed Day and many of the mega-caps would be red on the day you would think I had taken crazy pills. Yet that is exactly what happened.
I have spent a good deal of time chronicling how the Magnificent Seven are no longer so magnificent, how they have diverged from one another, how they no longer work as a bloc. I have also spent a lot of ink on how when Nvidia (NVDA) rallies it tends to suck the life out of the 493, but when it doesn’t rally it allows the 493 to rally. I saw nothing to change my view on this from Wednesday’s action.
But you know what made a higher high? No, not the (IWM) that everyone is celebrating. The Transports! They are now up 13% since just prior to Thanksgiving. There are several who have fussed but I look forward to the mainstream financial press fussing over them. And we still don’t see it. Short-term that old high at 17,750 ought to be resistance, though.
I am, however, disappointed in the (XLB) , the Materials Select Sector SPDR Fund. A few weeks ago I highlighted the higher low we saw (blue line). The XLB had a terrific run up, came back and tested the broken downtrend line (good). But I would have liked Wednesday’s rally to at least get to $45 by now. Let’s see if it has the oomph to keep going or if there will be more work to be done before it gets up there.
I was also disappointed in the Staples, bonds and Utes since they barely budged. Heck, in many ways they acted like those 2025 tech winners: lethargic.
Statistically, the number of stocks making new highs increased, which is the first time in over two months. That goes on the plus side of the ledger.
Breadth was good, not great. When we see the market up as much as it was and the NYSE has a mere 67% of the volume on the upside that is not impressive. Nor is it impressive when the Nasdaq has 56% of the volume on the upside.
I am still monitoring the relationship between the equal weight S&P (RSP) and the market cap-weighted S&P (SPY) , and while crossing that downtrend line isn’t some magical spot, crossing it would at least signal a change.
The Daily Sentiment Index (DSI) for the VIX slipped to 14, so one point lower than it was last Friday. The DSI for Nasdaq is at 80 and the S&P is a mere 74. A low reading on the VIX says to me expect volatility. A low reading on the VIX coupled with high readings on the S&P and Nasdaq says expect some decent downside. So we’ll watch to see how this plays out in the coming days.
I’ll close by noting there is no mistake on the Oscillator chart as Wednesday’s rally did not turn them back up. That’s what happens when breadth is not as good as the breadth was 10 trading days ago. And that’s what happened on Wednesday.
