UAL Soars but Investors Are Hardly Breathless
Investors love a hot stock, when it's a mega-cap.
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Note: I am taking tomorrow off as I have family coming to visit. My next column will be Monday morning.
I have a theory I want to share with you. There is something investors cherish when it comes to the mega-cap tech stocks. They cherish it so much that if those stocks are not participating, then folks cannot get over the top excited about the market.
Breadth can expand (it has). We can get the much sought after ‘broadening out’ (we have) and since that tends to occur at the expense of the mega-cap tech stocks, the level of bullishness is elevated but more muted than if the mega-caps rally.
Don’t get me wrong, folks are bullish but they are not frothing at the mouth. A move like UAL had on Wednesday, on the volume it had is more like, oh good look at UAL. If Apple had done that, the folks on TV would be breathless over it. If Apple had done that, the options market would show an amazing excess of calls being bought. But UAL? Hey great, what else ya got for me? (Let me note the Transports did break out and still no one is fussing!)
This is not to say folks aren’t bullish. The 30-day moving average of the equity put/call ratio just made a lower low (than July) and is now heading toward the extreme low we saw in July 2023. If the beloved tech stocks were screaming, my guess is this might already be at the July 2023 level.
The Investors Intelligence bulls have now gotten back to 57.9%, so they are once again high. The bears are steadfast though because they have been around 22% for ten weeks now. Think about it for a minute: ten weeks ago was early August and the big whack in the market. And when did the QQQs make their high? About a month before that.
I would note one interesting point about the bears. Notice how in the fall of 2021, as the market was making its highs, the bears were not terribly low. They troughed in the summer so that new high in the indexes in the fall had the bears already in the low 20s.
The Daily Sentiment Index lifted back over 80 for the S&P on Wednesday (to 81), but Nasdaq came down to 76 when the semis got smacked and stayed there on Wednesday. Y’see? Nasdaq had its best breadth day in months, upside volume clocked in at just over 70%, much better than the 50-60% we’ve been seeing. But if the rally doesn’t include the fan faves, the bullishness stays muted.
As the week moves on we can see the Oscillator lifting more each day as it works its way toward an overbought reading. I expect it will be there late this week/early next week. Perhaps folks will be giddy, not just bullish, by the time we get back to an overbought condition.
