Friday ended with yet another flat session in the major U.S. indices. This is becoming a pattern. Yet it's a change from the rest of the Friday sessions in 2013 so far, which had all brought rallies regardless of where the market had been earlier in the week. In fact, this was only the second Friday in the red -- and the other one saw the S&P 500 lose just a fraction of a point.
Where is the enthusiasm for stocks? I mean, this is supposed to be a bull market, isn't it? We are supposedly getting all sorts of equity inflows, aren't we? So why does the market lack any life?
When I looked at Friday statistics, I was struck by the high Arms Index (TRIN) -- because I found the volume oddly negative, considering the late-day rally in the indices, and a flat NYSE advance-decline line and the flat S&P. The S&P ticked down 1.5 points, yet net volume was -780 million shares. Just a week earlier, as it gained 8.5 points, volume came to +770 million -- so that earlier upside was in line, while the more recent downside was worse than it seemed on the surface. If we add up these stats, we get a 7-point rise on flat volume.
If we look at it in the form of a volume-momentum chart, we see a similar effect. This 10-day moving average of net volume is just crossing the zero line -- all while the S&P is at new highs. Where's the life in this market?
What really struck me was that the pattern looks similar to how it did this time last year: a relentless upward move in the S&P, and a decidedly downward momentum in volume. The good news is that there was that one last fling higher in mid-March. The bad news is that last fling was literally the last fling.
Turning to sentiment, I noticed that the one-week reading of the Consensus Bulls is now at 73%. This high reading was last achieved at last year's September high. In the spring of 2012, it climbed as high as 78%.
If we take this one step further, we see that the four-week moving average has not yet turned over, which is what it tends to do at or near market highs. Unless it moves under 64% this coming week, it is likely to continue on its upward path. However, this is the final week of February, so it has a potential to stall out as prior readings in the 70s begin shifting out of the moving average.
Finally, as noted here Friday, the chart of the KBW Bank Index (BKX) is hovering on the uptrend line. If we lose the banks, the S&P should falter. If the index gets saved, the same should occur in the S&P. The uptrend line has not yet been disturbed.
One last note on gold, which has been in a channel since the fall: It bounced off the lower line of the channel Friday, and it's likely to move up again later this week.
In sum, I think the S&P will break -- but until it cracks that line or the BKX breaches its uptrend line, the selling will remain minimal. Short-term, I think gold should bounce this week, but I would not consider myself bullish on it for any longer time horizon. As for the greenback and U.S. Treasury bonds, I remain bullish on the dollar index, and I am currently neutral on interest rates.