This Market Needs Some Emotion

 | Aug 08, 2014 | 6:00 AM EDT
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Do you remember how it was when we went up every day or, at least, what seemed like every day?  But more so, do you remember how the days unfolded?

Many mornings, we'd come in and see the futures down a little bit. The market would open and we'd see a push to the downside, but by mid-morning that downside would evaporate, since there was no selling and we would drift higher into the close. It was rarely a sharp rise. You might recall the countless columns I wrote saying there was no giddiness, just complacency. It was much more of a grind higher than a mad rush to own stocks.

Now we have the opposite. Each morning we come in and the futures are a smidge higher, or sometimes a bit lower; we have a rally attempt at some point in the morning, but the buying dries up and we fall back down. It is much more of a grind down than a true "get me out" selloff. It's the same complacency with a lack of emotion to it.

It's not as though the selling is so forceful or strong to make one feel panicked. It's more what we used to call eighths and quarters, so now maybe it's nickels and dimes. That's why the S&P keeps making lower lows and the number of stocks making new lows continues to contract. You might recall on the upside the S&P kept making higher highs and the number of stocks making new highs continued to contract.  What this market could use is a capitulatory low -- something with some emotion!

In the meantime, there is a lot of chatter about how similar this decline looks to the January decline in the S&P. I would beg to differ. Perhaps the S&P looks somewhat similar, but the underlying statistics do not. For example, here is the chart of the S&P from then. You can see we had two sharp down days followed by five days of sideways, one last whoosh and that was that.

In today's market we had some drooping then a one-day whoosh and then a steady erosion with a downward bias. To my eyes, the pattern looks quite different.

When it comes to the indicators, I think the McClellan Summation Index tells the story the best: these two declines look nothing alike. This one is much more widespread.

When it comes to put buying, these two declines look nothing alike. Look at the put buying now vs. then. Heck, we couldn't even get to 90% on the 10-day moving average of the put/call ratio in January. Now they are loaded up with puts.

I think if Facebook (FB) and Apple (AAPL) and Google (GOOGL) and Neftlix (NFLX) and all those type of names were getting crushed now the way they were in the spring, there would be a lot more angst, there would be a lot more emotion and for sure by now CNBC would have had a special report on Markets in Turmoil.

The best way to get a low in the market is a rally and a retest or a capitulatory slide. We've had neither. I keep waiting for the former; it has remained elusive thus far.

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