The Market Shifts as the Laggards Are Discovered
Silver, platinum, palladium, energy and drug stocks are learning how to win friends and influence the market. Let's discuss the change that's happening and what I believe it's signaling.
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In the last week, and primarily on Tuesday, there has been a shift in the market. I’m not even talking about the indicators. I’m talking about individual stocks and charts and groups.
Gold had been straight up all year. Coming off the April low it surged, but since it made that attempt at a new high in early May it has languished. Yet in the last week or so, while the leader (gold) languished, silver, platinum and yes, even palladium have jumped. The laggards were discovered.
Oh sure, a chart person such as myself would say, those bases in the other metals were just waiting for an excuse to get going and find some friends. But that’s what happened: the laggards finally moved.
As a reminder, I noted the Daily Sentiment Indicator (DSI) for platinum and silver had gotten to 86 two days ago and it retreated some Tuesday, along with the prices. And while it was not a full-throated every segment discussion on television, they did finally seem to want to talk metals (ex gold) on Tuesday.
Coming off the low in April it was technology that flew. And industrials. Some other groups joined in like the banks and financials but there have been many laggards as well. That changed in the last week, and especially Tuesday. In the last week or so the drug stocks have found some buyers with Health Care Select Sector SPDR Fund XLV, an ETF to be long health care, up 5%.
Energy found some friends this week as well, with VanEck Oil Services ETF OIH leading the pack, finally exceeding the May high. These two groups, health care and energy, were the most hated groups out there, but this week, well, heck, why not buy them?
But you see there are two sides to this. Tuesday also saw ETFs that have barely seen a down day, sell off, and they did so without the rest of the market doing it with them. Look at iShares U.S. Aerospace & Defense ITA, an ETF to be long aerospace and defense.
And then there was Netflix NFLX, which gave up a week’s worth of rallying this week. It finds itself right back where it was in mid-May.
This is probably why the number of stocks making new highs continues to refuse to expand. Tuesday’s new highs were a mere 51 on the NYSE, the lowest we’ve seen in a month.
My experience is when the charts I tend to like (down and outers) start moving it means folks are feeling better about the market. We should see it in the data soon, that they are more comfortable spreading out, buying the laggards and not sticking with the winners, be it metals or something else. It also tends to occur just as we reach a short-term overbought condition, which my Oscillator says should arrive late this week.
