Is Mine the Only Eyebrow Raised by Market's Day of Change?

 | Mar 08, 2017 | 6:00 AM EST
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HYG

Something very curious happened in the market on Tuesday. It went down. You're probably thinking, big deal. But you see, the S&P and the DJIA have not had consecutive down days since January. That's why Tuesday represented a change. Remember, it has been "The DJIA and S&P Show," and not much more for two weeks.

The Russell 2000 had its fourth red day in a row. Also a change because since November it has not had more than three consecutive down days. Speaking of the Russell, it is now back at its 50-day moving average. It is once again under its December peak. It has also given up an entire month of gains in the last two weeks.

Then there are the transports, which, similar to the Russell 2000, are under the December peak, although they are still about 40 points over the 50-day moving average line.

And what of the poor breadth? As we know, it has managed to roll the McClellan Summation Index over and has done so enough that it will take a net differential of +3,400 advancers minus decliners to turn it back up. Stop for a minute and consider we are not even 2% off the high of the S&P and it would take two massive -- and likely more than that -- up days to get this indicator to stop going down. This is what typically happens after the S&P has been sliding for weeks, not two days.

Each day, I calculate what it will take to turn this indicator from down to up (or from up to down, depending on its direction). When it gets to where it needs +3,000, it is into oversold territory. When it gets to +4,000 it's starting to get extreme. With the S&P barely down, it's hard for me to imagine the market is where it was (in terms of oversold-ness) just before the election. Rather I think it is more likely where it was circa that mid- to late September timeframe (red arrow on the chart).

Here we see it had a rally for a day or two and then slipped back down.

One reason I believe that is because we saw very little fear in the market on Tuesday. In fact, the equity put/call ratio was 54%. I had to do a double take because typically when the market has had any little blip to the downside, put buying has ratcheted up, but not on Tuesday.

Finally, I don't know if the high-yield and junk-bond markets matter as much now as they have in the past, but if you glance at the chart of the High-Yield Corporate Bond ETF (HYG) , I think you can see something changed when the calendar flipped to March and it accelerated on Tuesday.

Oh heck, perhaps the employment number will make all the statistics and indicators great again!

For more market analysis from Helene Meisler, sign up for Top Stocks, published five times a week.

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