The Other Side of the Mountain
Here's what happened Friday, how it looks on the 'other side,' and whether a bounce is in order. Plus, my one big concern and did you see the VIX?
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
You know what happened Friday?
What happened is the result of a stock market that had gotten too speculative and too certain. I much prefer when a market swings up and down but the markets don’t tend to do that anymore. They prefer to slowly climb the side of the mountain and come down the other side, which happens to be a cliff.
Just look at this chart of the (QQQ) s. Nothing broke. The line held. This is pretty similar to almost every other major index chart. Now look even more closely: there are still no lower lows, in addition to no breaks. But more importantly, look at that volume: 95 million shares. Do you recall how in April I kept begging for the QQQs go give us 75 million shares traded? They didn’t do that until the final days. Now they did it on Day One.
Breadth was pretty poor, as you can imagine, but it was not panicky, in my view. For example, the NYSE had 83% of the volume on the downside. So this so-called awful day didn’t even net us a 90% down day.
Yet I’d like you to keep in mind that breadth had been faltering quite a bit of late. That was the McClellan Summation Index sliding for the last two weeks. Now the Summation Index is still heading down, but it needs a net differential of +3,500 advancers minus decliners on the NYSE to halt the slide. That means it has stepped a toe into short-term oversold territory. Over +4,000 and it gets extreme.
And did you see the VIX? That is what I’d call getting jumpy.
Okay, so all of that is the case for a short-term bounce. But you may have noticed that I have not been harping about semis or technology lately. Lately it has been the financials. And they are still concerning to me.
Let’s begin with (KRE) , an ETF to be long the regional banks. I thought it would come down to $61-62 and it’s now at $60. Maybe that’s not a big deal but do you realize the KRE never made a higher high in 2025 (vs. the post-election peak)? And now it has broken the uptrend line that has been in place since May (blue). The KRE is now two points higher than it was post election.
The money center banks, represented by the Bank Index have fared better, But look at this chart’s action lately. There is support at that 140 area and I expect it will bounce from there, if not sooner. My concern is if it bounces and forms a head-and-shoulders top. At 140 it will be where it was right after the election.
The brokers have fared better but they haven’t gone anywhere since July. While they have not broken (under 1,000 does that), this is on my watch list now, where I wasn’t even paying attention a few weeks ago.
Finally, let me note that the number of stocks making new lows on Friday was 122 on the NYSE, which is the most since April. It’s rarely good when new lows are expanding and the market is a few percent off the high.
So yes, a bounce, but keep your eyes on the financials, especially because the intermediate-term indicators did not change on Friday.
