There's No Dearth of Market Divergences

 | Apr 12, 2017 | 6:00 AM EDT
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If you thought Tuesday's action would clear up the divergence between the VIX and the S&P, then I am here to report that it didn't.

Just look at the way the S&P came back from the lows. Or heck, look at the way the Russell was up most of the day. Then glance at the VIX, which gave up very little. That is unusual. Typically when we see the VIX get jumpy and the S&P begins to rally, we see the VIX retreat almost immediately and turn red. That did not happen. Therefore, the divergence continues.

And if that wasn't enough for unresolved issues, there is the move in bonds. It has been my view that yields should break under 2.3%, and while they do measure to 2% from this move, I am not convinced that yields will get all the way there.

Notice that the Bank Index, which typically falls apart when bonds rally (yields fall), had a relatively benign day, rallying back with the market and not even able to break that low from three weeks ago. Perhaps it is because everyone is waiting for the bank earnings this week. Whatever it is, there was a divergence here as well.

And then there are the utilities. Shouldn't they be screaming higher with bonds where they are? Yet they couldn't even get back to even Tuesday. It's another divergence.

The Russell was the clear winner on Tuesday. Keep in mind it has gone nowhere since early December. But it opted to outperform in a decent fashion on Tuesday. So did breadth. Net breadth was an impressive +700 issues on Tuesday. It keeps the McClellan Summation Index rising.

Nasdaq's breadth using volume was slightly negative, so its Summation Index continues lower.

In the midst of all this, the number of stocks making new lows has finally stopped expanding; there was a contraction on Tuesday for both the NYSE and the Nasdaq.

And what of sentiment? It too is all over the map. The Fear and Greed Index made it all the way down to 31 on the close but it was 28 midday. Typically, under 20 and the market is considered too bearish. The equity put/call ratio chimed in at 79%, which is on the high side. The last time it was this high was March 21, which saw a few days of stabilization and then a final whoosh down.

Contrast this with the Investors Intelligence bulls, which are back to 56.3%; two weeks ago they were at 49.5%.

In sum, I don't think Tuesday's whoosh down settled anything in the market. All we saw was more of the same divergences and group rotations.

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

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