When the Good News on the SOX Isn't Really That Great
The best news I have for you is that I think after the week we’ve had in the market, much of the bullishness has leaked out. Oh, it hasn’t spilled out to the point that folks are bearish, but they are surely more discouraged today than they were on Monday. You see, that’s what happens when the Russell 2000 loses three percent between Monday and Thursday. It doesn’t inspire bullishness.
Do you realize if you bought the Russell on the open Wednesday, the day after the election, you would now be losing money? How is this good news? It certainly has tempered the enthusiasm for stocks, hasn’t it?
Oh, I don’t have statistics for it, but I can sense it as folks start pinging me asking if I have seen the semis. Of course, I have seen the semis. I have written about the semis! I have noted that all those folks who were so bulled up on the semis have been nothing but disappointed since last summer.
Just look at the SOX relative to the QQQs in 2024. If I had told you that owning semis after the first or second quarter would be bad for your portfolio’s health, you would have thought I was nuts. Healthcare, we are all aware, stinks, but semis? I can’t believe It’s only this week folks are realizing how poor they have been relative to the major indexes.
In a market where we keep hearing how many standard deviations this that or the other thing is above its 200 day moving average, the SOX sits right at its long term moving average. It has cracked it twice before in 2024 only to be seen as a shake out and it was off to the races, or at least a good bounce.
But you know what? I said I was going to give you good news. Despite the fact that the SOX has now been red for five straight days, something it hasn’t done since March, folks took a break from selling the semis on Thursday. Let’s see if that keeps up. I do think if it cracks the 200 dma in the next few days it will be oversold enough for a bounce.
Over on Nasdaq the number of stocks making new lows continues to expand and we’ve now got over 200 new lows there. The NYSE did have about ten fewer new lows than it had the day prior so we’ll notch that up as a small positive.
The real issue is that the McClellan Summation Index continues to decline. This tells us what the majority of stocks are doing and since the end of September, the majority are heading down.
I will end by noting to those who have asked about Gold. I am still not a fan but it has come down to the top of support and the Daily Sentiment Index is now 25. A few short weeks ago it was 89.
