Bulls Rush In

Was it just a week ago everyone was concerned about ‘AI spend,’ and chips were commodities, and maybe we didn’t need that many?

Was it just one week ago everyone was concerned about the Korean stock market?

Was it just one week ago everyone was concerned about higher interest rates?

Now the market has rallied, and no one cares about ‘AI spend’ anymore. Now it’s great. Now the Kospi has rallied, although it has yet to cross the downtrend line, and it seems no one even talks about the Korean market anymore.

And interest rates? Pfft, the yield on the Ten Year has come down a whopping ten basis points, and everyone thinks this is the everything rally, and off we go.

The bears are back in hibernation. The bulls are back to berating the bears, and the put/call ratio has fallen to .69, the lowest reading since late May!

It is rare to see the major stock indexes trade like small-cap stocks, but that is exactly what has transpired the last two days. We have gaps up followed by more gaps up. Let’s revisit the chart of the QQQs that I have been highlighting.

I want to highlight it because the volume last Thursday and again on Tuesday has been just at/over 60 million shares. Since April, we have rarely had that sort of volume. We had a few days in early June when panic set in, and we got over 90 million shares twice, but that slide in July saw no such panic volume. The SMH, however, did.

Last week, I opined that I thought it might have been (the higher volume in the QQQs) shorts rushing to cover. I am inclined to think it is that, as well as folks just looking to get exposure to a group/index/ETF that they had shunned for the two months prior.

But I think there is a message in that: the same way we often get indiscriminate selling at lows, we are witnessing ‘just get me in and get me exposure’. I am anxious to see how bullish folks get with this week’s surveys.

At least the QQQs crossed the line (they are still into resistance). I expect there will still be buyers stepping up on pullbacks for the time being.

One of the changes I saw is that the Nasdaq McClellan Summation Index (using volume) turned up this week. This is the first upturn in nearly two months.

And the Nasdaq Overbought/Oversold Oscillator finally eked out a reading over the zero line.

I want to end with a comment on the Utes. They have been red for eight straight days, which makes them oversold, and they have bounced off a line. I suspect we get a bounce and another pullback, and then I might just warm up to them again. They have a tendency to form Ws before they rally well. That’s what I would look for.