Well, so much for my correction theory. They chose instead to run 'em back to the top of the range on the
S&P. So let's look at the statistics and see how they line up.
To begin with I will repeat that the intermediate-term indicators are all still headed up. They are not headed down. When and if they
do turn down, I will report on it.
For now, the 30-day moving average of the equity put/call ratio is still declining
as I showed in my column two days ago. The McClellan Summation Indices might have less of a cushion in what's needed to turn them downward, but for now they continue to rise.
But there's been another change that has taken place this week. The cumulative advance/decline line, or market breadth, has improved. It's finally made a higher high. So has cumulative volume on
Nasdaq.
Volume continues to be poor at best, but now the media are reporting on how poor it is, so who doesn't see that?
However, if you want to point the finger at something, it's the number of stocks making new highs. We still have yet to see an increase there. They continue to lag, and yesterday was quite glaring.
On the
NYSE, the new highs were 156 in April and 156 on Wednesday. Yesterday, they were 110.
On Nasdaq, the new highs were 58 in early May and 57 Wednesday. We had 42 yesterday. And I would point out that Nasdaq has been the best performer, yet there are only 42 stocks that are making new 52-week highs. What happened to the other 16 that were part of the party two weeks ago?
However you will see that the Oscillators are still not anywhere near the highs they were at a few weeks ago. It might seem absurd to you, but that means there is less momentum on this leg up than the last one. I'm certain that those folks who see all these huge stock moves on the upside think I'm crazy, especially when they see all these charts heading upward. But I am reminded of a button I have that says, "If it looks great, it's too late!"
What continues to amaze me is the burning desire everyone has to catch the top in oil. My inbox is filled on a daily basis with questions about buying
UltraShort Oil & Gas ProShares
(DUG)
ETF, but
as I said the other day, I never get questions about buying
Ultra Oil & Gas ProShares
(DIG)
ETF.
If we use the
U.S. Oil Fund
(USO)
ETF as a guide, I will say the same as I said the other day: The worst you can say is it's a correction. It is in a channel, albeit a rather steep one, but a channel all the same.
Since we're talking about commodities, let's look at the chart of gold again -- $890 is a critical level. A move up through there not only crosses the downtrend line but also gives gold a higher high for the first time since its peak in March. So far we have a higher low, so can we get a higher high?
Of course, this brings us back to dollar/yen. It had a moderate day yesterday -- rather quiet, in fact. The one thing that it did
not do was rally to the highs of last week the way the stock market did.
A move through 105 and change would be quite bullish, but since the two (dollar/yen and the S&P) have been tracking so closely for so long, I think this relationship bears watching.
If they are not moving in tandem anymore, then either something has changed in the equation or we have a divergence on our hands, and it's only a matter of time before one catches up with the other.
We are at that point in the triangle where if we are going to get a breakout, it needs to happen now. If we don't get a breakout, then the chances of dollar/yen becoming lackluster increase. I suspect dollar/yen will not breakout to the upside.
I will discuss the bonds next week, but back on April 3 when everyone was looking for lower interest rates, I showed how we could get higher interest rates and I drew in the potential for
a head-and-shoulders bottom on the chart of interest rates. Don't you wonder where all those folks who were so firmly planted in the lower-interest-rate camp went?
Now all I see is talk of a head-and-shoulders bottom in rates. Everywhere. If you look back at the column I wrote in early April, you'll see that I even discussed the potential for that to happen. And you know how I feel about that!
Overbought/Oversold Oscillators
For more explanation of these indicators, check out The Chartist's
primer.
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