This Market Reminds You of Watching the Movie Carrie
Bulls and bears may view what's happening from different perspectives, but here's the key during the Ides of March.
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If you ask a bunch of seasoned traders for their view right now I'd bet north of 80% of them would say they don't like this market. I'm only guessing but I would say it's because any market that grinds higher week after week always feels like a correction is right around the corner. And I would also bet that once we had a proper correction those traders would be happily bullish once again.
We haven't had a proper correction in months. What we do get is a day or two on the downside and then wham, right back up again. I liken it to the movie Carrie. You know that scene at the end, when you think she's finally dead and then you see her hand come out from the grave to grab you one more time?
While the bulls are in the "Carrie" camp, the bears are more in the "Julius Caesar" camp: They want to beware the Ides of March.
Is sentiment bullish? Oh gosh, yes. If the market had stayed up on Friday instead of reversing I have no doubt we'd be talking about sentiment being giddy. The Investors Intelligence bulls are at 59.4%, just shy of 60%, which they have not been since 2021.
The Citi Panic/Euphoria Model continues to scrape just this side of Euphoria. Citi says it is currently at 0.34 and Euphoria is over 0.41.
We have already discussed the fact that I don't think we have a Magnificent Seven market, probably not even a Fab Four. The QQQs are pretty much the same price they were a month ago. Microsoft MSFT hasn't made a new high in almost a month.
Just look at the ratio of the iShares Russell 2000 ETF IWM to the Invesco QQQ Trust QQQ and you can see IWM has been beating the QQQs for a month now. Sure it's rocky but overall the trend has been in IWM's favor.
Speaking of the QQQs, Friday's reversal saw just over 70 million shares traded, something we haven't seen since the lows in October. Long-time readers will know that I typically view high-volume selloffs in the QQQs as bullish but I haven't seen many that come from all-time highs.
Not only that, those high-volume selloffs typically arrive with statistics such as 90% of the volume on the downside or breadth is totally lopsided to the downside. That was not the case on Friday as breadth was flat and the net volume was up (more up volume than down volume).
I do think we need a proper correction. But I also think the key in this market is the support levels on the charts. It sounds simplistic, right? However, when the entire year for the S&P 500 has been contained within a channel, wouldn't you agree that if the lower channel line breaks then something has changed?
The QQQs are not much different as they too have bounced every time they have visited the uptrend line. Support matters because unless/until that changes, the market internals and sentiment haven't mattered.
Let me finish with a comment on the bonds, which had quite a rally in my absence. My initial target on TLT was around $96. I suspect we back off from there and rally the bonds again.
