This Wasn't the Rebound They Had in Mind

 | Jun 14, 2017 | 6:00 AM EDT
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That was not the sort of rebound folks wanted in those FANG stocks, was it? Something about the lack of an immediate rebound clearly spooked some folks.

I saw the folks on television who have been happy as can be with these stocks for weeks now showing some caution. On Friday and Monday, they said the selloff was unwarranted. Then on Tuesday, they said they weren't long the FANG stocks anymore. You see? There simply is nothing like price to change sentiment!

What has been encouraging for the last four trading days is breadth. As soon as the Russell 2000 started to outperform, breadth improved. Recall that a week ago I kept writing about the net volume and how it had been negative for seven or eight days, with the exception of one. But as soon as we made a higher low in the ratio of the Russell to the Nasdaq, breadth and net volume began to show vast improvement. Tuesday was no exception.

This better breadth has helped the McClellan Summation Index continue to rise, albeit lethargically. It's been a trudge and it hasn't even managed to take out the early May high, let alone the late February high. But up is up and for now it is up.

If you want to nitpick -- and I do because that's my nature! -- then let us note that the number of stocks making new highs is downright pathetic for a new high in the S&P. There were 122 new highs. On June 1, we saw 339.

Since Wednesday is the day the FOMC meets and is expected to hike for the third time in this particular cycle (if you can call three times in 18 months a cycle), I thought I would revisit the chart of the yield on the 10-year note. Recall that last week I thought we had gone too far on the downside and expected a rally in rates (down in price on bonds). We have rallied, but not a whole lot, yet oddly all those narratives about low rates being OK have gone quiet.

Rates are at a critical juncture because if they can't get back up over this 2.2% area, then 2% does come into play. And that might scare folks. It might also create some volatility in the market. I do think rates will tick back up in the next few weeks, but if I'm wrong, it's going to be because they could not get over 2.2% in a hurry.

One final note: I am doing a short interview with Forex Analytix at 10 a.m. ET today. If you would like to listen/watch, you can register for free here.

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

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