Volatility Rises Amid Sideways Action

 | Apr 11, 2017 | 6:00 AM EDT
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On Monday, everyone seemed more interested in the United Airlines public-relations fiasco than they did in the market. Perhaps that's because the S&P is now the same price it was in mid-February.

Yet despite all that sideways action, volatility is on the rise. The most curious thing is that the VIX has moved from 11 to 14 in the last week. It made a similar move in mid-March, only then the S&P fell 50 points with that rise in the VIX. In the current VIX rise, the S&P has not budged.

I am no VIX expert; I don't even play one on TV. But I do know when there is a divergence and there is one right now. There are many folks out there who are very smart when it comes to moves in the VIX, so I will leave what this divergence means to them. What I know is that when the VIX gets jumpy, we tend to see the market near a low. So if the VIX gets jumpy in the next few days, it will become interesting to me.

What I have harped on of late is that we've gone from total love for all industrials and reflation names to "uh oh." We've gone from love for the financials to "not so fast." We've gone from "transports are screaming Dow Theory Buy Signal" to "well, maybe not." We've gone from "health care is awesome" to "maybe there are issues."

The more we lose leading groups, the more folks cling to the groups that are working. As of a few weeks ago, technology was the last man standing in terms of groups that had seen very little selling. In some cases, that remains true. But I maintain that when there is too much love in one group, accidents can happen. You do remember how fast and furious the financials collapsed just over a month ago, don't you?

This is why I continue to focus on technology and specifically the semis. As I have noted before, the black line broke and I find that concerning. The green line is not as steep and comes in around 980, which is where we've seen support for the last month.

I grant you, there is support all the way down in the SOX, but lately I see some of those beloved names gapping down on downgrades. A gap down on a downgrade speaks of an over-owned stock to me. The SOX tends to be a leader.

And yet, breadth has improved, likely thanks to the improvement in the oil stocks. It has helped the NYSE McClellan Summation Index lift further, which is a positive for the S&P. Contrast that with Nasdaq, where beloved technology lives. For Nasdaq's Summation Index we see no lift at all.

So maybe all of this group rotation is what keeps the indexes sitting there with no oomph, but there are shifting sands underneath.

Happy Passover to those who observe this holiday!

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

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