We must give credit where credit is due: The Russell 2000 acted terrifically Tuesday and outperformed the S&P 500. The index is now just a fraction away from taking that Russell-to-S&P ratio to a lower low.
I realize everyone will focus on Apple (AAPL) Wednesday, perhaps even forgetting about the Federal Open Market Committee meeting for an hour or two. However, I want to discuss the dollar-yen pairing. These days we are all so focused on the euro, but dollar-yen cross saw quite an upward move Tuesday. The reason I want to show this chart is that, the last two times it saw such a move, the S&P followed suit.
Thus far this move is a far cry from the action we saw at the two previous points on the chart (boxed). Still, I ask you to note the dates of those two moves: Point A is early August and Point B is late October, both times during which the S&P tagged "highs."
You might have to squint to see it, but the dollar-yen pairing is desperately trying to cross that downtrend line. There is a huge amount of resistance at 78, so I believe it will be difficult to get through that the first time up, unless some news comes out that no one is expecting. But that, folks, is a base, and I would expect an eventual move up above 78.
I would note that the put-call ratio rose again Tuesday, as it did Monday, as folks seem to lean into the correction camp. Perhaps with Apple, and with the Fed on tap Wednesday, investors might give up on that view? Remember -- when everyone is looking for the dip to buy, we rarely get it. That, or it's deeper than anticipated, so it's too scary for folks to want to buy.
In the meantime, have you noticed that so few are talking about the utilities anymore? Remember when this sector was all the rage? Notice that the Dow Jones Utility Index has not bounced since the first day of the new year. It is, however, coming into support as it heads down into the 440-to-445 area. I believe we'll see a bounce from this area. That would be another test for the market: If the utes rally, will stocks sell off?
For now the market remains overbought, and is digesting that condition by going sideways. The window is still open for a higher high on the 30-day moving average of the advance-decline line, but the indicator is still at a lower high vs. November. We have a few more days to see if it can better that reading, or if it will make a lower high.