Will It Be a Frightfest or a Chopfest as We Head Into Halloween?
It's been a choppy market recently, despite everything that's happening. Let's look at stocks, bonds, and the Dollar.
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It’s almost Halloween, and one must wonder if the markets will get scary into month end. It seems to me we’ve had such a chop-fest for so long that folks have been lulled. Either they are anxious over the election and feel we should rally after the election, or they are anxious over earnings but feel once the mega-cap stocks report, we’ll be out of the woods.
By that, I mean, I don’t hear anyone looking for downside. We see it in the put/call ratios and their moving averages now. Look how low the ten-day moving average of the equity put/call ratio is. I can’t decide if this is similar to June of 2023 or if this is ‘enough.’ There aren’t many other spots on the chart where we have done this much grinding at the lows.
I mean we’ve got interest rates backed up (did you see the TLT gapped down and rallied to green? A girl can hope, can’t she?). What I find curious is that yesterday’s move in rates seemed one of the mildest, even considering the gap down in TLT, and yesterday was the day folks decided to sell their Utes. Was it a Realization Day? The day everyone finally realizes why they are selling these stocks?
XLP has been sagging for weeks now, but somehow, it was Tuesday that folks decided to gap it down and sell it. And break the uptrend line.
Sure the Homies had bad news on Tuesday—this was the second gap down this month for them—but curiously they closed at the high of the day (unlike the Utes and the staples).
And while no one seemed to notice, the US Dollar Index had a reversal yesterday as well. The DXY didn’t quite tag that resistance line but this too is worth watching because that has been a one way trip since the calendar turned to October.
In any event, now we might get to test my theory that when the Mega-Cap stocks rally, folks open the door to giddiness. The QQQs didn’t quite break out on Tuesday; they still need to clear that 502 area, but perhaps they will do so now.
Breadth has been terrible this month. The blue line (breadth) keeps going down while the S&P inches up. That’s the way the market was last spring when folks got giddy into early April.
The McClellan Summation Index has been heading down, while the big-cap indexes lift. That’s the playbook folks tend to like. Oh sure, they all say they want better breadth, but I think they prefer it when the Mega-Cap tech stocks are leading the way.
The chop continues.
