Stocks Do the Cha-Cha-Cha While the VIX Breaks Out
The good news is that this is how patterns begin to set up. But we still don't like to see a VIX breakout.
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We had something that broke out of the range!
It wasn’t the S&P. It wasn’t Nasdaq. Nor was it the small or mid-caps. It wasn’t bonds either. The buck finally moved (more on that later), but that’s not what I am referring to either. Nope, it was the VIX. Yes, the VIX. I have been waiting for it to jump out of its range for weeks now, and it has refused to do so. Monday, it did it.
It also closed up quite a bit on the day, so it seems the VIX did not share the enthusiasm of the buyers of the S&P at 6800. But at least we got a move there.
Elsewhere, though, not much changed. There were no breaks of any of the indexes. There were saves everywhere, though. And the group that caught the most attention is software. IGV really is trying to bottom. It is giving us a lot of up and down and back and forth. It’s been doing so for nearly a month now. Let’s face it, the plunge was late January and the first few days of February. Since then, we’ve been doing the cha-cha-cha, which is how we get patterns to shape up.
Get the IGV through 83-ish, and there isn’t that much in the way until it gets to that 87-88 area. If it can do that, then I would expect by then everyone will be back in the pool (and then we’d likely see another rug pull).
My view on software remains that we are in the bottoming process where we ought to see a lot of back and forth, and the individual stocks sort themselves out. That usually takes months. We’re one month into it.
We can see it in the number of stocks making new lows. The peak reading was 569 on February 5th. Since then, each trip down to support (but no break of support!) has had fewer new lows.
And as indicated last week, the McClellan Summation Index for Nasdaq stopped going down. Now it is attempting to turn back up.
I still think the 493 are overbought and in need of a pullback. So far, they are doing their best to prove me wrong. But just over a week ago, I said the US Dollar looked as though it could rally, and perhaps that would be the catalyst for the 493 to pull back. The buck rallied well on Monday, but the 493 did more milling about than pulling back.
The buck has some resistance in this 99 area. Let’s see if the 493 care.
I want to conclude by noting that I was asked about buying some staples. I am not inclined to do so. In fact, I am inclined to do some profit-taking here. I liked the staples (XLP) months ago, and now they have run too far for me.
We still have an Either/Or Market, so it makes sense that if tech is going to rally a bit, then it ought to do so at the expense of something else.
