The Index Movers Are on Fire. Everybody Else is Flat on Their Backs.
In 2024, that was an interesting signal. Could it prove prescient again?
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The major indexes have taken on a life of their own as we’ve now seen Nasdaq up six straight, and the S&P would be up six straight if it weren’t for that one day it lost two whole cents.
I noted that breadth made a new high last week, but we know the McClellan Summation Index is quite far from doing so. Then there are the number of stocks making new highs. The NYSE last Friday clocked in at 125; Monday was only 119 new highs. Last fall, this number was over 450.
I don’t tend to spend much time looking at all these various (some even esoteric) ETFs. There are so many of them! But there was a time not long ago, RSP, the equal-weight S&P was the talk of the town. Then on Monday, I saw a chart of the RSP relative to the S&P, and quite frankly, I was beyond surprised (add this one to my surprised list).
Keep in mind this is a ratio, not a chart of RSP itself, but relative to the S&P, it is flat on its back. It is the same place it was in July 2024 and again in December 2024 (red arrows). Both of those preceded a market correction. I suppose the takeaway is that when the index movers take the index (SPY) down, the non-index movers tend to hold up better.
What really struck me is that as soon as the market rallied in April, the underperformance of the equal-weight S&P kicked right in (blue arrows). It has thus far shown no sign of turning, but since this is the area it has found support in the past, it’s certainly worth paying attention to.
But did the Daily Sentiment Indicator (DSI) move? The S&P is at 82, as is Nasdaq. So not much. The VIX did see its DSI push to 20, so it is once again on the verge of becoming a teenager. Should the market rally into the holiday later this week, these might –might!—change.
But why would the RSP hold up better relative to the S&P? Probably because folks get a bit defensive, so they concentrate on trading staples, drugs, and defensive names. And we know if we take out the weightings in the S&P, that’s what helps move the equal weight along.
I really thought the Dollar would rally, and I have been very wrong on that. It made fresh lows on Monday. But now the DSI is at 17, so this too is something to put on your radar screen.
