80 Percent Upside Volume While the Transports Race Higher
We get a nice oversold rally, with strong participation. But take a look at the Transports.
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Yes, I know everyone is all excited about the rally, but before we get to the market overall, I want to point out that the Transports made a new 2024 closing high on Tuesday. And no one seemed to notice!
Oh sure, the new closing high was only by about ten points, but heck, Nasdaq made a new high by about that much a week or two ago and folks got so excited over that.
The chart here shows the high from the summer of 2023, which is fast approaching, so it may be a short-term resistance area, but as I said a few days ago, I like that the Transports had been holding their own and not giving much back during last week’s decline.
Just to be clear, there has been very little change in the ratio of the Transports to the SOX (a chart I highlighted the other day), so nothing has broken out, but I do like that there was no fuss made over this small milestone of a new 2024 closing high.
As for the market as a whole the rally had a very good statistic: 80% of the volume on the NYSE was on the upside. It has been quite some time (about two months) since we have seen that. I take that as a positive for the market.
As for the indicators, there was not much movement. We will see that the Overbought/Oversold Oscillator looked a bit more lively after Tuesday than it did on Monday as the Oscillator scoots toward the zero line.
The McClellan Summation Index is still heading down. The number of stocks making new highs increased a smidge, but are still down from the peaks. So the big highlight for me was the Transports and the large upside volume.
Bonds did manage a rally after beginning the day on the downside. I would fuss over it, but with the FOMC meeting on Thursday looming, it‘s still fragile even though I still believe rates are set to fall. That 94 level is still a hurdle on the upside.
Finally, the ten-day moving average of the put/call ratio did not budge on Tuesday but it turns out much of the volume from Monday’s action was in the VIX, and the Index. The Index put/call ratio was the highest it has been since December 2021, which, I admit, was actually a good time to be long puts.
But the VIX put/call ratio also soared, to 3.02. This is the highest reading since a few weeks before the 2020 election. I like to look at the 21-day moving average, and you can see it is now the highest it has been in two years.
Keep in mind that I view VIX options traders as pros, so we tend to want to be on their side. If they are betting this heavily on a lower VIX (higher stocks) at some point in the near future, then we don’t want to fight it. It’s a matter of when the moving average rolls over and heads back down.
