What's Up With This Crummy Market That Bends but Will Not Break?
The Market
You want the best news from today’s crummy market? I am now hard pressed to find someone who doesn’t know how poor breadth has been.
Of course, most of the folks have an answer, and you just have to love this: just buy those stocks that are going up. Well, isn’t that easy?
I saw a statistic today from Bespoke. The Nasdaq 100 was up .57% today and only 29 stocks were up on the day while 71 were down. I mean, how easy is that? Just buy those 29 and we’ll be great, right?
None of these folks mention what happens if the buying in those 29 stocks dries up or if it becomes 15, or maybe folks start selling them to buy the other 71?! But those are the sorts of rationalizations we tend to hear when a trend has been in place for as long as this one has. This trend turns one-month old tomorrow.
(IWM) continues to hold this uptrend line, by a thread. To recap the week in the IWM. Monday morning it filled the gap at just under 200 and rallied (crummy, but rallied). Wednesday it gapped up only to give back much of the day’s gain and today it filled yesterday morning’s gap. That means the Russell closed the week last week at 2026 and today it stands at 2038 so despite how poorly it acts, it is up on the week.
Oh it’s not up as much as the big cap indexes but it is up. And that uptrend line has not broken.
Then there are the Transports, which I thought should have a rally this week. They have. For one day. They too popped and dropped. They are down on the week, but not by much, less than one percent.
My point in this exercise is that as bad as the divergence has been—and it has been terrible, we haven’t seen anything break yet. All we’ve seen is a lot of churning. I said as we entered June I expected choppiness. We’ve gotten it everywhere but the big cap indexes that are dominated by a few stocks. We rally and can’t hold it. We bend but can’t break.
One final note is that the DSI for the S&P, Nasdaq and VIX did not change. They remain at 87 for the S&P, 88 for Nasdaq and 12 for the VIX
New Ideas
Keep an eye on Wayfair (W) . Every time the stock has come down and toyed with breaking this line it has been saved. There is support at 50-ish but if it comes down there I won’t consider it saved.
Way back in early May I thought General Electric (GE) was a short. It fell one more day, rallied (did not make a higher high) and now seems to be finally breaking down. It only measures to around 150 but that is the first crack in what has been one of those stocks that has refused to go down.
Today's Indicator
The put/call ratio on Wednesday fell to .66 which is the lowest reading since November 2021. On Thursday it shot right back up to 1.01, the highest reading since late May.
Q&A/Reader’s Feedback
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Freeport McMoRan (FCX) has some light support in this 47 area. If it breaks, it will complete a head and shoulders top that measures to much better support around 42. I still do not like the chart although it is getting a bit short term oversold. Hopefully in the coming weeks we’ll see all that love for copper in May turn into ‘you can’t buy copper now’.
(XME) , an ETF to be long metals and mining stocks, has some support all the way down to 55-57. For me to like it again, it will need to go sideways and chop for a few months as it did in the first quarter of this year. For now, I’d be a seller on a rally to the 61-62 area.
I suspect (XLU) will begin improving in the coming weeks. Right now it feels as if all the love for it a month ago has dissipated and everyone is back to ignoring it. But the correction could use some more time.
