The Real Question Is What's Happening With the Insiders
While Friday's rally didn't do much for several of the indicators, there was one interesting change.
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But did Friday’s rally change any of the indicators? Yes. And no.
The breadth was good, not great. For example, last Tuesday, the S&P tacked on 34 points, and net breadth was +1075. Friday it tacked on 61 points, and net breadth was +1060. But, and this is key, it was enough to get the McClellan Summation Index to stop going down.
Recall, before the employment number, I viewed it as neutral because it only needed a net +500 advancers minus decliners on the NYSE to stop the decline. I view it the same today because now it needs -500 to turn it back down. In other words, when one day of trading can swing this up or down, it hasn’t changed. Yet.
The number of stocks making new lows continues to contract (bullish), but the new highs refuse to expand. The NYSE is clocking in at the same levels it was a month ago. Despite the Russell 2000 ticking up and out of the range. Expansion is bullish, stagnation, not so much.
The real question is whether sentiment has changed. It’s still pretty similar to what it has been. The options ratios show complacency while the surveys do not. The one big change is that Insider selling seems to have picked up, or at least relative to Insider buying it has. The ratio is now the highest it has been since January, although it was much higher in January.
Anecdotally, you might recall a month ago when Treasury Secretary Bessent was set to meet his Chinese counterparts in Europe, and I recounted for you the story of how I watched sentiment shift in real time. My Saturday Twitter Poll was out, and folks leaned bullish that morning. Then a headline flashed that the Chinese delegation had left the building. I watched as my poll respondents went from voting UP to DOWN in a matter of minutes. Of course, as the day wore on, we discovered that the Chinese had simply left to enjoy a bit of lunch. By Sunday evening, folks were quite excited that there was a (non) deal struck.
I do not get the sense that there is any sort of anxiety about what will come of the trade talks with China this week. There is hope, there is a sense that ‘something will get done.’ I said this back in late April, but will say it again: I do not think the market will react negatively to trade and tariff talks now. Oh, we’ll get the occasional gasp and air pocket, but not like we saw in March. Somehow, it has moved beyond that, as markets always do (which is again why I hate narratives).
What is quite different about this market than much of what we have seen in the last decade (or more) is that the new highs are in (some) industrials, nuclear, and metals. It’s not in the Mag 7 and their friends (i.e., heavily centered in growth). And much of the hot money is in crypto and coins. A year ago, everyone was breathless over NVDA, but with the stock the same price as it was a year ago, it has become ordinary again.
