Much of What We're Seeing Is Not Standard
I realize I have been on that theme of all the speculation lately, so let’s begin with that, and then we can move on to some other topics.
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I realize I have been on that theme of all the speculation lately, so let’s begin with that, and then we can move on to some other topics. And if you are wondering why I can’t stop with these speculative statistics, it’s because in my work, I do not look for outliers; I look for what is standard. And much of what we are seeing is not standard.
For example, it is not standard for the Russell 2000 to tack on nearly one percent and breadth on the NYSE to be negative. It is not standard for the Russell to be up that much and net volume on the NYSE (up minus down) to be flat on the day.
And it is definitely not standard to see volume on Nasdaq regularly clock in at nearly twice that of the NYSE. The other day, we looked at the five-day moving average of TRIN (The Trading Index, which looks at the relationship of breadth to volume). Low numbers tend to mean too much speculation, and high numbers tend to mean too much selling and panic.
The five-day moving average is now at .43, which is lower than it got in January 2021.
I decided to look at the ten-day moving average. It is not as extreme, but working its way there with a reading of .59. It got to .55 in January 2021. If you look all the way on the left, you can see it got down this low (before 2021) in February 2020, just before the Covid Crash.
On Tuesday morning, we saw a big whoosh, and Nasdaq had fewer stocks making new lows on that whoosh down. Now, Nasdaq did not make a lower low (than Friday), so technically, it wasn’t a positive divergence, but it was the first day we had some selling, and new lows did not expand on Nasdaq.
I cannot say the same for the NYSE because there we saw new lows match last Friday’s reading. At least there was no expansion!
I can report that bonds were up on Tuesday, but more so, the Utes gave us the third straight green day. And still, no one is fussing over them. Aside from Bitcoin-related stuff, not much else has done this well in the last two weeks.
Speaking of Bitcoin, I tend not to make many comments on it. I try and stay away from it since to me it is just a speculative vehicle. But I do feel compelled to note that the Daily Sentiment Index (DSI) is now 86 for Bitcoin.
One final comment is that when you look at the Overbought/Oversold Oscillator and see that it has come down this week, it is not a mistake. As I explained two days ago, the breadth of the market hasn’t been great.
