From Meme Stocks and Crypto to Bad Breadth
The last few days have dampened some of the so-called animal spirits that everyone has been yapping about.
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I’ll bet the last few days, especially Tuesday, have dampened some of the so-called animal spirits that everyone was yapping about on Friday. After all, Monday was mostly about meme stocks and crypto, and Tuesday’s statistics were the worst we’ve seen in weeks.
Let’s begin with breadth. I have been complaining that it has not kept pace with the S&P for almost the entire post-election swing upward. Yet before we even knew the results, the market acted much better. Recall last Tuesday’s 80% of the volume on the upside.
Since then it’s been pretty disappointing, most days we’ve barely gotten to 70% of the volume on the upside. And that is with the Russell tacking on ten-percent.
Then comes a day like Tuesday, which should, typically, be viewed as a standard ‘off day’ during an oversold rally. Yet, Tuesday saw 75% of the volume on the downside. That’s more than just an off day, especially when the post-election time frame did not see that on the upside.
Breadth, the blue line, still hasn’t managed a higher high. Now it needs a rally of good breadth of more than (approximately) 2500 issues (that’s advancing minus declining stocks on the NYSE) to make a new high. The best day we’ve had so far was last Tuesday—pre the results of the election—at +1785.
Then there is the McClellan Summation Index. It is not often you see the small caps rally nearly ten percent and the Summation Index sits there, refusing to join the party. But that is exactly what has happened. And after Tuesday’s terrible breadth, this indicator has turned south again. Now, it needs a net differential of +700 (advancers minus decliners on the NYSE) to halt the renewed decline.
I have been harping about stocks making new highs. Last week, the reading was awesome. Since then it has tailed off quite a bit. That’s fairly standard. It is the stocks making new lows that is concerning.
Nasdaq continues to clock in at well over 100 new lows daily. In fact, the last time Nasdaq had fewer than 100 new lows was back in late October. That’s a lot of stocks making new lows for a market at new highs.
The NYSE, at least up until Tuesday, had been much more moderate in the number of new lows, but Tuesday saw a jump to 64 new lows, the highest reading since November 1st when the S&P was trading back at 5700.
Now, take a look at the Overbought/Oversold Oscillator. It is nowhere near the top of the page. It has been my contention that it ought to get there as we get overbought later this week. So yes, I do think we see one more rally. But if I am wrong about that and the Oscillator can’t even get up to the top of the page, that would be very concerning.
