Well, at least the circus in Washington is just about over -- or, at least this version is.
But, beyond this, what should concern is the Nasdaq and the statistics it's generating. On Wednesday morning I reviewed the intermediate-term indicators for the index, and I must report that I saw little to no change in them during yesterday's session.
Let's begin with stocks at new highs. The Nasdaq is now 20 points higher than it was during its previous closing high, and there were 215 stocks at new highs. Here's the progression as a reminder: During the July Nasdaq high, there were 400 new highs on the index; for the September high, there were 240; and on Wednesday there were 215. That represents a narrowing market.
Did anyone notice that the Philadelphia Semiconductor Index (SOX) did not even make it to the previous day's intraday high? Wow. I am sure someone will blame it on Intel (INTC), but I believe it's absolved by the fact that it managed to turn green during the day.
It is volume, however, that once again is quite disconcerting -- 1.7 billion shares, exactly the same as it was during Tuesday's downdraft. Then we must come back to the net differential of up volume to down volume, or the breadth of the rally. On Wednesday I explained that this has been lagging, and it continues to lag. Here is the math: Tuesday's 21-point Nasdaq decline saw a net loss of 965 million shares. Wednesday's gain of 45 points witnessed a gain of 970 million shares. That leaves us with a gain of 24 points and volume flat as a pancake.
There is one more point I'd like to make about Wednesday's rally -- one that I have not seen anyone discuss. The Russell 2000 lost 10 points Tuesday and only gain 12 points Wednesday. Talk about standing still.
Now, let's go back to a chart I discussed here several times last month. It is the ratio of Nasdaq to the S&P 500. In the past I've mentioned that, when this ratio gets above 2.15 and then turns down, we start watching for signs of failure. Please note that the current rally shows lagging on the chart vs. the S&P.
Now let's move toward the chart of the KBW Bank Index (BKX). As you know, I have noted several times in the last few weeks that the BKX-to-S&P ratio has been trending upward since late September. That trend continues, even if it is still marginal. But it is the chart BKX itself that is really improving. You will need some strong glasses to see it, but it did cross above that downtrend line during Wednesday's rally.
It's got resistance just overhead, but at least we can now see that pullbacks might create the right shoulder of a head-and-shoulders bottom now.
The Nasdaq has outperformed for six months now. It remains my view that it is time for the index to take a back seat.
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At the time of publication, Meisler had no positions in the securities mentioned.