Breadth Might Be Back, Here's What I'm Watching
After a dramatic reversal by Nvidia, the indexes are sure to react.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Note: I will be on vacation for the next week. My next column will be on Monday, July 1.
I do not know if that was rebalancing, real selling or even real buying that we saw on Thursday. It was as if someone desperately needed to own (or cover shorts?) in DJIA stocks while selling technology stocks, but not all technology stocks, just the ones that have been up.
Yes, that was quite a reversal in Nvidia NVDA and folks are fussing over the volume, which I grant you was high. But the reversal in March was similar and came on higher volume. Come on, the stock was over extended, needed a rest and maybe the buying was exhausted. Or maybe it wasn’t. It was one day, but the chatter would have had you think the sky was falling.
Will the indexes care? Of course they will. They cared on the way up, so they should care on the way down. So let’s talk about the others.
Breadth actually outperformed the S&P. Not by a lot, but gosh, when was the last time we could say that? The McClellan Summation Index is still heading down. It requires a net differential of +1200 advancers minus decliners on the NYSE to halt the decline. But, keep in mind the 30-day moving average of the advance/decline line is heading toward an oversold condition as we enter July and that has typically meant the others should get a turn.
If we are to finally, after six or seven weeks, see the others get their chance to rally then we are going to have to see the number of stocks making new lows contract. If this was the chart of stocks making new highs, we’d think, "This is good." But it is stocks making new lows, so you want to see this contract.
Now let’s turn to bonds, which I was asked to follow up on. When we last looked at them, I thought the 4.20% area on the 10 year was a big line in the sand. I’ll couch that, using perhaps something closer to 4.15%, but I think that line I have drawn is key. I don’t imagine we will break it with any oomph in the next few weeks. I think bonds may be more apt to mill around for a bit, but if that breaks with any oomph, that is a big change in the market for me. It would signal that interest rates are going — if not in the immediate future — lower over time.
I have thought they are more apt to just say in a wide trading range but breaking that line I think changes that.
