I Went on Vacation, and All I Got Was This Lousy Stock Market
The divergence is alive and well, while the rally window for the others could be closing soon. Here's what to know and watch, especially from the Utes and the all-important semis.
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As you can imagine, I keep quite detailed notes on the markets. Even when I am on vacation I take my notebook with me and jot down the statistics and make comments on what I see (from afar) in the statistics. Some might call it an obsession (!!) but the market doesn’t stop just because I went on vacation.
If you own the Russell 2000 you might think that is an incorrect statement because when I left, the small-cap index was at 2017 and Friday’s close was 2026. So sure it was up, but 10 points in two weeks is not exactly a barn burner. It’s less than ½%. It is as if it stopped trading.
Then there is the big-cap S&P 500, which actually rallied 100 points in that same time frame. I know 100 points isn’t what it used to be but it is close to 2%. So yes, the divergence is alive and well.
For the last few weeks I have said I thought early July was an open window opportunity for "the others" to rally. But you can see that so far only a handful of the others have joined the rally; most of them are still on the sidelines.
The Volume Indicator, which is basically an expression of upside volume as a percentage of total volume, is still at 46%, which is oversold. But stop and consider that with the S&P at all-time highs, the last six weeks in the market has given us a mere 46% of the volume on the upside (roughly). With such a divergence you’d think sentiment would not be bullish yet in the last two weeks folks have actually gotten downright giddy.
Meanwhile, the National Association of Active Investment Managers have lifted their exposure to the market back over 100% (they are on margin). And based on that volume chart we know they are not buying the others, or at least they are not loaded up with them.
Even the call buyers have gotten bullish. In the last year we haven’t seen the 10-day moving average of the put/call ratio under 0.90 very often. It got there in late June and has actually been rising for two weeks.
The Daily Sentiment Index (DSI) for the VIX got to 10. The S&P saw its DSI at 83 and the Nasdaq's is 85. And the Investors Intelligence bulls are at 63%.
Basically the tale of two markets continues. I think the window is still open for the others to rally but if they can’t do so this week I will have to concede that their window is closing.
I am going to continue to focus on the Utes (I still think they are trying to bottom again) and the SOX.
The semis have been underperforming; note there is no higher high in the SOX. If there is no higher high in the next week I think it becomes vulnerable to breaking that uptrend line as we head into late July.
Notice, too, that relative to the QQQ’s the SOX has been a big laggard. That’s the same thing that occurred just before the April swoon.
