Why We Just Had An Odd Day in the Markets

 | Mar 13, 2018 | 7:11 AM EDT
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It was an odd day in the market  Monday because Nasdaq did so well and the Dow did so poorly. It was also odd because the small caps, while not as terrific as Nasdaq, stayed green all day as well. This means that despite the decline in the S&P 500, breadth was positive

This means we now have seven straight breadth days for the NYSE, something we haven't seen since early October when we saw breadth go positive for eight straight days. Interestingly, Nasdaq has now been positive for seven straight days as well. It last had such a streak in that same early October time frame, when it went to nine straight.

So let's take a look at the upcoming overbought condition. Yesterday we reviewed the data behind my own Oscillator. Today we'll take a look at Nasdaq's Momentum Indicator. This indicator is based on price so I plug in higher closes for Nasdaq until we see the indicator no longer rises even if price keeps on going.

What I have done for this exercise is walk Nasdaq up another hundred points over the coming week. No matter what I do the Momentum Indicator turns south on Wednesday. I honestly don't know if a breather on Monday would have changed that but we now have my own Oscillator which gets overbought Friday and this one which gets overbought on Wednesday.

Sticking with technology. Let me state upfront that the semis haven't done a thing wrong but everyone seems so bullish on them now. Yet look at this resistance line on the SOX. At the very least this upcoming overbought condition coupled with the resistance should see some cooling off here. They probably rally again after that.

Then there is the VIX. It was up on Monday-and quite a bit at that. I do think the VIX can rally but I am not yet in the camp that thinks it is set to spike in the next few days. I thin it is more likely it goes up a bit and comes back down again. Perhaps something like the pattern I have drawn in blue on the chart.

In terms of sentiment I would say the anecdotal chatter Monday was not nearly as giddy as it was on Friday but statistically not much changed from Friday. The put/call ratio had another day where it was neutral, at 87%. Just consider a week ago when the S&P 500 was up 30 points on the day we saw the put/call ratio at 100%, and this week with the S&P 500 down a mere 3 points it is much lower. That's what I mean when I say we're seeing acceptance of the rally.


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