Thursday Resolved Nothing and I Still Have Concerns
Let’s run through some of the concerns I have for the current state of the market.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
It has been my contention that the SOX/Nasdaq is getting oversold and is due for a bounce. It has also been my contention that the others which held up so well while the SOX fell are due a pullback in August. Thursday’s action did not change my view.
Nasdaq, by one measure, is already oversold. By some other measures, it will be short-term oversold next week. You can see the (coming) oversold condition easily on the chart of the Overbought/Oversold Oscillator. So let me address some of the questions I have had about this.
The first question is, will this oversold condition spend time down here in ‘oversold’ the way it did in late November and late March? It already has. There is no V spike, so the answer is already yes.
The next question is if it matters that the Nasdaq Composite is under its 50-day moving average. It did not matter in November, nor did it matter in March, so for me that is not a great concern.
What is a concern for me is that Nasdaq came right down to the same level it held in June, and held, so we did not get any panic. The volume in the QQQs was a mere 35 million shares. Recall, in early June, it got to 90 million shares. What concerns me is that the VIX is not yet jumpy (it might still get there). So there was no panic.
It also concerns me that the number of stocks making new lows equaled what it was in early June. I’ll call that a draw since I would have preferred fewer new lows. I still think Nasdaq sees an oversold bounce next week.
Now let’s move on to the others. There was a big change there. The number of stocks making new lows on the NYSE nearly tripled this week. They now number the most they have since March. This is why I believe we are more apt to see the others catch down to the semis/tech in August.
As far as sentiment is concerned, anecdotally, I sense technology traders are despondent. Their beloved tech stocks have not acted well for two or more months. That’s frustrating and depressing when you are losing money. So we haven’t seen panic but gloom.
Yet at the same time, I sense complacency in the others. Look at the rails! Look at the Utes! Look at the defense stocks! They like the banks! It reminds me of early January when folks ignored tech stocks as if they didn’t exist, but gosh, there was so much love for banks because, well, you know, they were up.
We can see some of the shift in the sentiment in the AAII survey this week as bulls fell to 29%, the lowest since last year.
We can see what I would call hesitation in the NAAIM Exposure number as it has flipped back and forth between 100-ish and 80-ish since May. So, they are no longer bulled up as they were last week (95), but they are still complacent at 84.
Thursday did not resolve anything in my view.
