Amid That Dull Session, an Interesting Shift

 | May 14, 2013 | 6:30 AM EDT
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Well, that was a mighty dull day, and probably not what folks were banking on when they bought calls on the CBOE Volatility Index. Nonetheless, on a statistical level, there has been a minor shift in the last few days.

I should preface this by saying none of the statistics have mattered of late, or at least they haven't until now -- but you might at least find this change of interest: The market's breadth has lagged for the last few days.

If we add up the breadth on the NYSE since Thursday, we get a net negative reading of about minus 770 issues (that's advancers minus decliners), and the S&P 500 has gained 1 point in that time. For the most part, breadth has been tracking the move in the index, so it is somewhat curious that this stopped last that stopped, and that the trend has continued for two more days.

I thought of this because, as longtime readers will know, one of the numbers I calculate is what it would take to roll over the McClellan Summation Index. Last week, at Wednesday's close, there was quite a cushion here: It would have taken a net differential of negative 2700 issues to turn the McClellan Summation downward. Yet, three days later, and with two down sessions -- none particularly severe -- it will only take a net differential of negative 350.

On the chart below, you can see that this indicator typically contracts much more gradually, as it did in March. This latest move, by contrast, is rather abrupt and steep. Of course, again, it'll probably turn out to be meaningless in this market, which tends to miraculously smooth over any negative indication before the indices continue zooming ahead.

McClellan Summation Index

Beyond that, would someone tell me why CNBC is more concerned about the Bloomberg mess (a reported leak of data from 10,000 Bloomberg clients) than they are that Spanish banks have tumbled about 5% in the last three trading days? Every few weeks, it seems, something comes out that reminds us Europe is not fixed -- contrary to what everyone appears to believe.

In that vein, I have my eye on Banco Santander (SAN). The good news is that the stock hasn't broken the uptrend line. The bad news is that shares have lost 5% in three trading days, and no one seems to have noticed.

Banco Santander (SAN)

The bullish argument here is that U.S. banks are clearly not bothered by the decline of their Spanish counterparts, as the KBW Bank Index served as a bright spot Monday.

KBW Bank Index

I should note that Tuesdays have ended in the green for almost the entire year. So we'll just have to wait and see if those VIX call buyers turn out to be right -- if we see a sliding market and a rising VIX -- or if we can continue using this sub-20% VIX put-call ratio as a contrary indicator, and expect another rally.


Overbought/Oversold Oscillator -- NYSE

Overbought/Oversold Oscillator -- Nasdaq

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