Is Your Portfolio Partying Like It's 1999?
The truth is, most stocks are down. The AI-fueled tech stocks are keeping the market afloat.
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I have noticed so many of the same folks who believe this is like the tech bubble tell us this is probably 1998 or even 1999, so there is plenty of runway left, they say. Yet don’t you find it interesting that those same folks who say that also tell us that ‘you can’t time the market’. Isn’t that exactly what they are trying to do?!
I don’t know if this is 1999-2000. I have said I doubt it is exactly like that because rarely does the market repeat an event that folks are so familiar with and have traded through so recently. Are there aspects of this market that are similar? Oh yes. In 1999, if you added dot-com onto your name, it practically made your stock go vertical. Now all you need to do is announce a deal—any deal—with OpenAI and you get a similar result.
In 1999, the old economy stocks were dragged downward almost daily. Not all old economy stocks go down now, but an awful lot of them do.
But what we’re concerned about is the fact that since last summer, the majority of stocks have been heading down or sideways. This is not to say there haven’t been great rallies along the way, but overall, most stocks made their highs months ago. You can see the peak in new highs in September, not to mention that that was far below the readings we saw a year ago.
You can see the McClellan Summation Index heading down since July. It had a respite in September, but since then it has tumbled lower.
Even if we use Nasdaq, where all the action has been (and where I use volume instead of the advance/decline line), we can see that this too has turned south and even squeaked out a minor lower low on Tuesday.
So, at some point, don’t we have to get oversold again? Just over a week ago, we came into the week overbought. We have been working that overbought reading off since then. You can see the Overbought/Oversold Oscillator for the NYSE has come all the way back to where it was a few weeks ago, when we had gotten oversold.
But let’s use the Nasdaq Oscillator because that has come down to almost where it was in early August. I believe that shows the weakness under the hood, but we should look at the numbers to see when it might get oversold again.
We look back ten days ago to see what numbers we are dropping. Ten days ago, there is that big red number, but then we have a few more big positive numbers. Early next week, we could be back to a decent oversold reading. You see that string of red numbers we’d be dropping? That would be what makes us short-term oversold.
If we have a bit of a relief on Wednesday (up) and then come down again into the end of the week, maybe we’ll have a jumpy VIX by then. Maybe we’ll have some of this newfound bullishness back off by then. At least if we had that, we’d have a good setup for another rally.
