That Volume Pop Wasn't Panic, It's Just Those Penny-Stock Speculators
Volume jumped on the Nasdaq today, but it wasn't what it looked like.
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Will the tariff news bring us panic? That remains to be seen. It hasn’t done so yet.
As for Wednesday’s decline, if you are excited because the equal weight S&P was barely down on the day, then I say let’s look at some of the indicators rather than the charts.
First, breadth wasn’t great but as I noted yesterday, it hasn’t been great. For four of the last five trading days, it has been red. And quite frankly I can even up that to five of the last seven trading days. It’s not been a stellar oversold rally.
Thus far all this weak, breadth has not rolled over the McClellan Summation Index yet, but one more down day and it will do so.
The number of stocks making new lows is expanding once again. We are not quite closing in on the numbers we saw in mid-March, but they are once again expanding as new lows on Nasdaq have doubled since Monday.
So, while the equal weight S&P was basically flat on Wednesday the actual data says there was once again selling taking place under the hood.
I’d like to report that sentiment, if we use the Investors Intelligence survey, has not moved much but it has moved enough that there are now more bulls than bears as bulls moved up to 30.5% and bears moved down to 28.8%. Obviously, it wouldn’t take much to flip them back to more bears than bulls.
Maybe we’ll even see the NAAIM folks lower their exposure to the market because, with last week’s reading of 64, they are still pretty neutral.
We did see the put/call ratio end the day at .96. It is the highest reading since March 14th, so something spooked folks on Wednesday even though the equal weight S&P was flattish.
Sticking with sentiment, you may have noticed that Nasdaq’s volume felt unusually high and therefore you might be thinking, aha, we have some panic. Please put that notion to rest. The penny stock speculators are back. Wednesday, we saw PTPI close at 14 cents, up eight cents on the day. But it traded 1.6 billion shares. There were some others just under a billion shares, but if you are looking for panic in the overall volume, it wasn’t there. In fact, net volume was positive on Nasdaq for the day. And I would remind you Nasdaq was down two percent.
I am going to end by showing you a chart because if the SOX cannot rally again, I believe you will see this chart everywhere you turn. Those lows, dating back just over a year on the SOX, are all pretty much the same area (4250). If this breaks, maybe we’d get some panic, but away from that, it will also complete a big top.
The Oscillator says we should rally one more time, but the indicators are what I will be watching.
