This Market Is Like Groundhog Day, and I Want Out!
The chop continues. And it doesn't appear like there's going to be a change.
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It has been nearly three weeks since Groundhog Day. You might recall back then I called this market a Groundhog Day market because I had been expecting chop and it had begun to feel like every day was the same chop.
Since that time, we have had one or two days that didn’t resemble chop, but for the most part, chop is what we’ve gotten. Case in point: last Friday, the S&P closed at 6114. It currently stands at 6117. Yet this week, everyone seems to have gotten more bullish.
Those who were cautious a week ago shifted this week, yet that darn chop continues. The folks at AAII didn’t get more bullish, but they pulled in their bearishness by about seven points, taking the bears down to 40%. The four-week moving average of bears is now 41% which takes it to where we were in November of 2023.
But you see, in November of 2023, the market had been heading south for three months and had lost about ten percent. It made sense that folks were bearish. So, we should put this indicator on the bullish side of the ledger, shouldn’t we?
Yet, take a gander at the latter part of 2021. The four-week moving average of bears was high and rising as the market kept pushing upward. In early January 2022, the four-week moving average of bears was 41%. But putting this on the bullish side of the ledger back then was wrong, wasn’t it?
We might opt to resolve this by checking in on the NAAIM folks and what their exposure to the market is. Well, that is now 91.4. That is on the high side. So, we should be bearish, right?
I think when the market chops as this one has for four months now, the market can’t get enough momentum on either side for us to think everyone is bullish or everyone is bearish. Is there complacency? Oh yes. Of that, I have no doubt. And I think that’s why we have the chop despite all that money pouring in over the transom.
If you were upset over the breadth of the market on Wednesday when it was negative while the S&P was higher, then I have to point out that net breadth on the NYSE was -385 on Wednesday, with the S&P up 14 points. Yet on Thursday, when the S&P lost 26 points, net breadth was -375. Not a lot of selling. More like chop.
Did it change the McClellan Summation Index? It stopped going up. It would require weaker breadth to get it to roll over.
And look at the Overbought/Oversold Oscillator. Earlier this week, I asked that we probe over the old high so that we could see what was up there, but I also cautioned that by midweek, we would be overbought again (short term). Where does that leave the Oscillator? Right back at the zero line. Chop is what you get when we can’t lift or crumble off that line. If the Oscillator doesn't lift on Friday, I suspect it will do so on Monday.
I would love to tell you that I see a clear path in one direction or the other, but it seems neither side can get traction. The SOX couldn’t break down, so it rallied. The Bank Index couldn’t break out, so it slid.
The same way Bill Murray’s character wanted out of Groundhog Day in the movie, I too want to see a change, but I still do not see one.
