Will the Fed Save Us From This Bifurcated, Divergent Market?

Will the Fed save us?

Oh you wonder what they might save us from since the S&P and Nasdaq have been making new highs. They need to save us from this narrow market.

Last week I complained when we had the S&P at a new high and there were a mere 100 stocks making new highs on the NYSE. Tuesday’s new high had 56 new highs.

Over on Nasdaq the new highs numbered 104. Last week there were 135. Heck, I’m not even comparing these numbers anymore to the 300 new highs we saw in the spring, now it’s just to last week.

Then there is actual breadth which has been negative for the last four trading days. Heck, it’s been positive only once in the last seven trading days. That means the cumulative breadth chart is going in the opposite direction from the S&P.

That also means the McClellan Summation Index is heading down. It now needs net breadth (advancers minus decliners on the NYSE) to be positive by +2100 to halt the decline.

Two weeks ago the market got a little bit oversold. The S&P has rallied quite a bit since then but most stocks have not. That is unusual. I would like to explain it to you but I can’t. What it tells us is how weak the rest of the market outside of the index movers has been. I do think—based on the math—that unless the market falls apart on Fed Day—this Oscillator ought to get itself up and over the zero line on Wednesday.

Speaking of stocks making new lows, the NYSE saw another increase but for the first time in a while the Russell made a lower low by eight points (vs Monday’s intraday low) and there were fewer stocks making new lows on Nasdaq. Monday saw 175 new lows while Tuesday saw 137. Oh sure maybe the selling just migrated to the big banks but I don’t want to rationalize the indicator.

Nasdaq’s Hi-Lo Indicator is now at .42 which tells you how weak this last lift up has been. It tells us how few stocks are participating. It may not matter to the indexes (it may never matter again in my lifetime!) but you can see the divergence. The good news is that it is moving toward an oversold condition.

So yes, I really do mean to ask, will the Fed save us from this bifurcated, divergent market?

Bid to win my hand-drawn chart of NVDA

On a personal note, many of you know that I still chart individual stocks by hand. With NVDA splitting ten for one it means I must put my NVDA chart in the discard pile and start a new one (it’s a long story but unless splits are a multiple of 80 I must start a new chart). Therefore I have decided to auction off my old NVDA chart for charity.

Here is the link to the description of the chart and the bidding process. I do hope you will consider bidding.