Do Indexes Even Correct Anymore?
The major indexes just grind higher, while individual stocks can get shellacked.
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I know it feels as though the market is all about AI, Crypto, and Quantum. But it’s also the banks, although not all financials.
Even the KRE, an ETF for Regional banks that we looked at the other day, has rallied back. It has not made a higher high, so that needs to be watched, but when we looked at this chart the other day, and I drew in this line, noting it should hold there, and it has. But I would rather ask you to look at this chart, forgetting what it is.
Do you see the way it rallied into May and then spent the next six weeks correcting (blue)? And then it ran up again, and then in July and most of August it corrected once again (green). That is the way stocks ought to trade. They ought to correct along the way. It shouldn’t be a one-way street.
And stock indexes ought to do that as well. Only it seems these days it’s all or none. When the market goes down, it is relentless, and when it goes up, it is relentless as well. It just doesn’t give us a pattern.
But let me show you a financial stock that has not acted so hot: Moody’s MCO. I mean, it’s not a bank or a broker. It’s sort of a staid financial. It got seriously whacked on Thursday. Oh, sure, it has support at 470, but as we have witnessed this year, there are air pockets all over the place. Remember all those software stocks that got mushed a few months ago? Gapping down 20-30% like it was no big deal.
The indexes do not correct, but individual stocks get taken to the woodshed.
As long as we’re on the topic of financials, please take a look at Visa V. It gapped down in June and hasn’t been able to make a higher high since. This former fan favorite doesn’t even get a mention anymore. For the time being, it has held that line rather smartly. If the line gives way, it would be interesting (bearish) because Mastercard and American Express have very different charts.
I wasn’t going to mention the restaurants again, but Darden and Cracker Barrel had poor earnings, and now Domino’s Pizza DPZ is breaking. I mean, isn’t pizza one of the four food groups?
On the sentiment front, the AAII folks got bullish this week. The bulls jumped nearly 14 points to 41.7% and the bears fell 7 points to 42.4%. It was the biggest jump in bulls since January.
As much as I was surprised by the Daily Sentiment Index (DSI) for Nasdaq staying at 84 yesterday, I am equally surprised it remains at 84 today. The S&P has crept up to 82.
I still think we should see a proper pullback, but the group rotation continues while the indexes march on.
