Cash Is King, Except During Rallies
And, let's take a look at GLD to see if it's nearing a peak.
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I do hope that the strategist who had finally decided cash is king just yesterday put some money to work. Quite frankly, she might be a better contrary indicator these days than my mother, so I will monitor her bullishness because we are sure to see a change of heart.
In fact, I would be surprised if we don’t see a change of heart everywhere we turn. The put/call ratio was already showing a lot less bearishness on Tuesday as it moved down to .86.
But let’s take another look at the Overbought/Oversold Oscillator. I had been expecting it would get up over the zero line, and so it has. The question is, when does it stall out and get overbought?
That string of negative numbers we were set to drop off the Oscillator has a few more days. By that I mean Wednesday, this indicator drops a nearly negative 1400. Thursday, it drops a big positive number, and Friday, it’s got one more big negative number. Then it gets overbought again.
Currently, the McClellan Summation Index is heading upward. It needs a net differential of negative 2000 (advancers minus decliners on the NYSE) to halt the rise. If the market rallies with decent breadth in the next few days, I estimate that by Friday afternoon, this indicator would need approximately -4000 or more to halt the rise. That would make it overbought.
Yesterday, we discussed the number of stocks making new lows in depth. Today, let me report that for the first time in a month, since March 25th, there were more new highs than lows on the NYSE. That should help the bottoming process.
In addition to that, we saw 89% of the volume on the upside. I know many will fuss that it wasn’t 90%, but I could remind you that when we had over 90% of the volume on the upside two weeks ago, it didn’t matter, did it? I tend to care more about a 90% downside day than I do about 90% on the upside.
Speaking of volume, have you noticed the volume in GLD, an ETF to be long gold? I still cannot believe the Daily Sentiment Index (DSI) did not get over 90 in this entire run, but take a look at the volume on GLD yesterday. It was the highest since early 2022.
Unlike the QQQs, where I like to see a high-volume decline as I think that is bullish, GLD tends to peak on high-volume rallies. Some might point out that the rally a year ago did not really peak, and they would be correct, but that was a five percent decline that corrected over a few months. It wouldn’t surprise me if Tuesday’s high volume in GLD led to a correction.
