Well, at least the market wasn't down another 1% Wednesday. In fact, the pattern changed to feature some bounces along with the intraday declines.
The good news is that breadth was quite positive for such a down day. The bad news is that, even with that positive breadth, the McClellan Summation Index will need yet another positive day for it to turn upward again. It stopped rising a week ago, when the S&P 500 was at 1501, and I think the key takeaway here is that it hasn't been able to get going again, even despite positive breadth in four out of the following five trading days. It won't take much of a decline to turn send this indicator south, either.
I have been complaining about the number of stocks making new highs for a month now, but the net differential of new highs minus new lows has been steadily rising -- until this week, that is. Now it has turned lower.
The bright spot, oddly enough, remains in the Nasdaq's cumulative volume. This indicator continues to push higher each day, even though the index itself hasn't managed to do so.
Yet, on Wednesday morning, we saw some selling begin in Europe. (Yes, I am back on the European theme yet again.) In fact, Germany's Dax is now down on the year. While I have highlighted the ratio of this index to the S&P 500 several times, let's now check in on the Dax itself.
Before 2009, this would have been considered a breakdown that measures to 7350. The way it stands today, though, this index could go sharply higher -- as if Wednesday's break never occurred -- from a simple nod of the head and the wink of an eye from European Central Bank President Mario Draghi, after Thursday's policy meeting. The key now is whether the market doesn't respond to reassurance from Mr. Draghi. Now, that would be a change of pace!
As for U.S. Treasury bonds, let's follow up on the five-year bond. Last week I suggested that, if the yield broke out above 0.0825%, it would mean a further move up near 1%. Yet look at this chart. Does that look like the kind of breakout that's going places? That looks more like a fake-out.
Much churning has been happening of late, and the lack of movement in interest rates for nearly two weeks -- despite a breakout -- is just one factor. The S&P's dance around 1500 is another factor, and a third is is the Russell 2000 milling about at 900. The sentiment figures show far too many bulls, and yet the market has simply been a giant chop fest. As soon as prices go down, the selling dries right up. I see this as a negative.
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