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Was it just a week ago everyone was freaked out over the health care bill? You remember: If they turned it down, the market was going to tank. And if they passed it, all would be right with the world.
Well heck, they didn't even bother voting on it. The first reaction was a shrug. The second reaction was a small amount of panic Monday morning and now, once again, it seems all is right with the world. I mean, the health care law (for now) remained where it has been and the world didn't collapse.
If you listen to folks now, there is no reason for concern because we've moved on. Politics is no longer important, now it's all about looking forward to first-quarter earnings and how great they will be. I know I can't wait to hear how 70% of companies beat their earnings estimates; did you ever notice that it's almost always something around 70%? It gets reported as if this is something special.
In any event, breadth has again made for a good read. Earlier this week, I showed the chart of the McClellan Summation Index and we had to squint to see the turn upward, the first such turn in a month. We no longer need a magnifying glass to see the turn. There is even a cushion. By that I mean it would take a net differential of -1,600 advancers minus decliners on the NYSE to turn this back down. That would mean a really harsh down day or several poor breadth days would stall this out. So there's a cushion for a down day or two.
But if you want to be concerned, the Nasdaq Summation Index using volume is lagging. Just look at that uptick. Shall I wait while you get a pair of glasses? I say it is lagging because Nasdaq has gone on to make a higher high and you can barely see the up move in the Summation Index. More, it will only take a net differential of -700 million shares to turn it back down. March 21, the net volume for Nasdaq was -1.6 billion shares, so you can see one moderate down day would send this down again.
This goes along with the ever-contracting stocks at new highs for Nasdaq. As noted here yesterday, there were 100 new highs, down nearly 500 from the peak in December. Thursday saw exactly five more than that. Again, this is unimpressive and shows the narrowness of the move up in Nasdaq.
I know many believe the key to Nasdaq is the s- called FANG stocks. I think the key is the semis. They have been terrific and relative to Nasdaq itself they were nothing but up through year end. This year, though, they have stalled out on a relative basis. It's possible that after such a great run they are simply digesting the move, but this is the chart I have my eye on.
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At the time of publication, Meisler had no positions in the stocks mentioned.