Note: Helene Meisler will be traveling for the next few days. Her next column will appear Wednesday, Jan. 23.
Lately I have discussed the amount of complacency I regularly see in the market -- not giddiness, which doesn't quite characterize the sentiment. While I still don't see much of the latter, on Thursday -- when the S&P 500 moved to a higher high -- what I started observing was not as easy to put into one phrase or word.
What transpired was more akin to taunting -- we saw folks saying things like, "Hey bears, here's why you're wrong." While I was working on my statistics Thursday, I was only watching the news peripherally and had sound off, yet I could have sworn I saw my pal Jim Cramer twisting the head off a stuffed bear on Mad Money.
Sure, this is anecdotal. But if you want statistics, we can cite some of those as well. Let's begin with the number of stocks making new highs. In September, we saw a peak of 495 new highs on the NYSE. There were 454 on Jan. 2, and 380 during Thursday's S&P climb to 1480. That constitutes obvious contraction.
The market got overbought last Friday, and so it remains now. At least the Nasdaq came down for a few days this week after getting overbought, but the S&P just moved sideways.
Then there is the volume. On Tuesday, net volume on the NYSE came to +1.055 billion shares with the S&P up just over 1 point. Thursday saw net volume at +1.044 billion shares with the S&P up more than 8 points. I am certain someone will rationalize this by telling me that Bank of America (BAC) sank on high volume. I would retort with this: Did that matter to you when BofA had volume on the upside and skewed the statistics positively?
Speaking of the banks, the KBW Bank Index (BKX) did manage to end the day in the green, but just barely. That means the BKX-to-S&P ratio has not made a higher high since the first week of the new year -- and the banks are market leaders.
Anecdotally, I see many folks dismissing the earnings and action in BofA. Doesn't that bother you at least a little bit? It might not be an exact comparison, but the first selloff in Apple (AAPL) didn't bother anyone either. On a very short-term basis, BofA shares have broken the uptrend line and are now sitting at the neckline of a tiny head-and-shoulders top. If the stock breaks the neckline, remember the chart of Apple -- another beloved stock that broke a small neckline several months ago.
What of the breakout in the S&P? Look at this chart and tell me if you see it.
Now here's what came after it.
So new highs and volume are both contracting -- and sentiment is complacent. Given all this, I believe the market is headed for a pullback.
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