The Indexes May Have Stalled, but the Indicators Are on the Move
Let’s talk indicator charts. They have moved, so it’s worth discussing them. It’s also worth noting that the indicators have moved a heckuva lot more than the actual indexes.
This Friday will mark three weeks since October 11th. I did not pick October 11th randomly. That blue circle on the McClellan Summation Index is October 11th, the point where this indicator could not lift after a few days of rallying and turned south again.
It’s that same time frame when the market’s breadth turned sour. Yet on October 11th, the S&P closed at 5815. Today, it stands at 5813. You might think the small caps are much lower than they were on October 11th, but they are not. Their closing price that day was 2234, and today, the Russell stands at 2233.
Sure, Nasdaq is up since then. The QQQs are up two points. The SOX, though, is down about 200 points or four percent. So my point is ex the SOX, most of the indexes are flat. Now, let’s look at the Overbought/Oversold Oscillator. It is now the lowest it has been since June. On no movement in the underlying indexes.
But since this indicator is based on breadth, it tells you a lot about how crummy most stocks have been. Most of those other plunges in this indicator have been accompanied by at least a one percent whoosh in the S&P, not a flat move.
The 30-day moving average of the advance/decline line has also plunged since mid October and now, for the first time since June hovers at the zero line (the math says it is still not oversold).
The Volume Indicator has slipped to 51%, the lowest since early August. But admit it, that is quite a plunge on no movement even in the small caps.
Back on October 11th there were over 200 stocks on the NYSE making new highs and now there are 128. Nasdaq is no better with 293 then and 158 now, even though recall Nasdaq is higher than it was in mid October.
And it’s not like sentiment has soured that much. The Investors Intelligence bulls are still at 57.6%. Perhaps we’ll see a shift in the AAII bulls (again) when they are released on Thursday but if we look at the 21 day moving average of the put/call ratio for ETFs we see an awful lot of complacency there. So it doesn’t seem that the deterioration has bothered anyone.
If the Index movers can move the S&P down and we can get a little panicky then at least the indicators are already ahead of the S&P but right now the market feels like everyone is waiting until after the election because the last two times (or is it 3?) the market rallied right after the election. Is that a bit too much consensus?
