I Don't Like the Feel of This Market
Normally, a market that consistently closes strong is an indication of institutional accumulation and viewed as quite positive. There's a problem, though...
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For the third day in a row, the S&P 500 rallied late in the day and helped cover up some poor underlying action. The late rally on Tuesday was more volatile than the rally the two prior days, but it was another case of opening near the lows and closing near the highs, which is typically bullish.
Normally, a market that consistently closes strong is an indication of institutional accumulation and is viewed as quite positive. The problem with this market, however, is that breadth has been consistently poor, and the leadership has been choppy. It was the big-cap technology names and Nvidia NVDA in particular that boosted the market again Tuesday.
Breadth was weak primarily due to the struggles of the Russell 2000 IWM, which closed under its 200-day simple moving average for the first time in over a month. There is a gap on the chart that was created following strong earnings from Apple AAPL and other Magnificent Seven names.
Most of the speculative action that looked so good last week has dried up. Even the meme names like Gamestop GME are barely moving. The list of stocks moving more than 10% is now quite short.
Once again, it is a small group of bigger stocks covering up the weakness. The rotation into secondary and speculative stocks has dried up, and that has made stock picking more difficult.
I do not like the feel of the market action, but until the indexes do something more profound, we just have to wait and see how things develop.
Have a good evening. I’ll see you Wednesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
