As Soon as You Think You Know the Market, It Will Change on You
After 11 straight days the 'secret' is out. But here's why that's good. Let's also check in on the QQQ, the Oscillator, and where real action is right now — in the bonds.
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We’ve still got that every other day thing going in the market. That’s 11 days straight. You know the best news on this subject? Folks have started to notice it.
I have always said that the market shows us a pattern over and over again until we finally learn the pattern. And then the market changes the pattern. Let‘s see if Wednesday can close in the green on the S&P 500.
My problem with believing we can break the pattern is that Tuesday’s rally statistics were pretty pathetic. Heck, the Russell 2000 was flat as was net breadth on the NYSE. Upside volume on the NYSE was 42% and the Nasdaq, for all the hoopla, fared only a smidge better at 55%. Not exactly a great day in terms of breadth.
Even if we look at the new highs, they continue to contract. The S&P is a fraction away from a new high and there were 99 stocks making new highs Tuesday.
Look at this chart. As we leveled out and began to chop stocks making new highs angled lower. The new lows have not expanded. Not yet. But the Nasdaq did have more new lows than new highs Tuesday while the index itself powered higher.
I was asked to check in on the QQQ chart, which has me currently sidelined. I’m not sure I trust it to power though that 495 area, which is where that spike high from late September comes in as well as the line. Yet I am not bearish. It just doesn’t inspire me here. I will say that if we are to go back to the Mag 7 narrow type market then this ought to power through.
It’s just hard to get excited over the market when the Oscillator is heading down and there is no movement in price. That’s what happened in May and June and that market was pretty narrow until July.
The real action though was in the bonds. They began the day on the downside and came back. They are doing this sort of action right near the resistance line (for rates). We have the Fed Minutes out on Wednesday followed by the CPI later in the week but I think rates should back up a bit from here. This 4.10-4.20% area is where I expect to see it stop for now.
I was asked if I have a longer-term view on bonds/interest rates. I have thought for a long time that rates are likely to stay in a wide range. I have used 3-5%. I suppose I can narrow that to 3.5% on the low end. At some point I may change my view and look for a much bigger move (i.e. we break out of the range) but considering sentiment has been swinging on bonds more than stocks lately it’s hard to imagine we’ll move out of the range with any urgency in the immediate future.
