Breadth Is Not Bearish, But New Highs Refuse to Move Higher
Let's look at bonds, breadth, utes, and metals.
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I have been of the mind that bonds won’t break down (rates up). One of the reasons is that the Utes have held up really well. Typically, we’ve seen the Utes lead on the downside—or at least in the last few years we have.
The Utilities had that terrific bounce off 990 in mid-May and looked as if they would finally break out over that 1050 area. But once again, the Utes got up there and fell back. Not to be deterred, they tried again in early June and have since fallen back one more time. Clearly, three times was not the charm.
Now the Utes are trying to break a bit more. If 1010 doesn’t hold on this trip down, the Utes will move from the positive to the negative side of the ledger. The same way a stock that can’t break down is bullish, one that can’t break out is bearish.
What is not bearish is breadth. It finally made a higher high on Monday. It’s marginal, but marginal counts.
Yet the number of stocks making new highs just cannot seem to improve. The new highs on the NYSE were actually fewer on Monday than they were on Friday. And recall Friday’s new highs are still under the late May reading of 96. The new highs numbered 75 on Monday. But the new lows are not expanding.
Away from that, you might recall I highlighted the base in the chart of Palladium a few weeks ago using the ETF PALL. It’s done well and has some room to run, but the metal folks have seemingly gotten even more excited over is Platinum. It hasn’t gotten much airtime, but if you are trading it, know that the Daily Sentiment Indicator (DSI) is now at 86 for Platinum (it is only 67 for Palladium). It probably means this cohort of metals needs a few days of rest/pullback.
Silver, too, has finally broken out (maybe this is where all the hot gold money has gone). My measured target is around 35-ish, but I want to report that the DSI here is also 86. The curious thing is the folks on television haven’t even ‘discovered’ the moves in these metals yet. I can only guess that it is coming any day now. That will be the sign a pullback is imminent.
Finally, the Overbought/Oversold Oscillator should have less upside momentum this week. There is no exact time frame it gets overbought again, but I’m leaning toward late this week/early next week.
And yes, I am still looking for a pick-up in volatility in June. Did you notice the VIX closed green on Monday?
