One of Those Days Where the Rising Tide Lifted the Other Boats
Tuesday was an index-driven market.
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Tuesday was the first day in quite some time that the market felt very index-driven. By that, I mean breadth lagged. Now, before you get hysterical, breadth is still fine, it’s just that on Tuesday, it did not lead as we had only about 65 percent of the volume on the upside. That number has been chiming in well over 70 percent most days.
With breadth lagging, the number of stocks making new highs on the NYSE did not increase. Nasdaq did see a minor increase, but I continue to monitor the Nasdaq Hi-Lo Indicator, and you can see it did not budge on Tuesday. The math says it should try again to push upward, but Tuesday was not it. As a reminder, if it is at a lower high (than last week) when we get intermediate term overbought (late next week), it will be a negative for the market.
The bonds still can’t rally. About the only good news I have for you is that, on Tuesday everyone seemed to notice that interest rates are knocking on the door of ‘higher’ and, having been rising since April 29th, bonds are a little bit oversold now. The bad news? The Daily Sentiment Index (DSI) is at 43, so it is nowhere close to showing too much bearishness on bonds.
The Utes are now down four percent in the last week, after having had a failed breakout. They have been red for five straight days and six of the last seven, so they are getting short-term oversold.
Long-time readers know that I think stocks are okay when the Utes are rising or at least hanging in there. The Utes have mostly been sideways all year, with the exception of that plunge in April. Support is pretty solid at 990. But their action goes on the bearish side of the ledger.
On the sentiment front, it seems as if everyone is bullish now. The ten-day moving average of the put/call ratio reflects this (it is at .83 now). But we need to see some of the other indicators confirm this.
The Daily Sentiment Index for the VIX is still at 19. The DSI for the S&P nudged up to 78, and Nasdaq is at 79, so they remain on the high side of neutral; they have not yet crossed the line to giddy.
The market could use a few days of digestion and backing off. Then I’d like to see another rally next week as we head into the Memorial Day holiday, because that is when we will be intermediate-term overbought. And that is when we can assess whether or not these indicators are rolling over or not.
