The Kentucky Derby is on Saturday. Almost every year, my husband and I host a Kentucky Derby party, so I tend to pay close attention to the horses that run this particular race. This is a rare year in that there is no clear favorite.
I thought of this on Wednesday as Churchill Downs picked the post positions for the 20 horses that will run on Saturday. One horse hasn't run in months. One horse is actually blind in one eye. One horse that was going to be the favorite was ill for two months, so the last race he ran was a stinker. It's like the Island of Misfit Toys. And in many ways, the stock market is similar right now.
Yes, there are the fan faves, but then everything else is in chop mode or a major decline. Would you bet on a one-eyed horse that is in the 20th post position? Is Halliburton (HAL) the one-eyed horse?
Everyone fusses about Apple (AAPL) being up 15% since that February gap up. But since then, Halliburton stock is down 22%. And the last week has been particularly awful. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
I know, you're saying, but it's oil. So how 'bout U.S. Steel (X) ? It has been halved since late February. Halved! Can you imagine if one of the fan faves had halved? There'd be a "Markets in Turmoil" show for sure. The stock can't even bounce after the gap down. Another one-eyed horse!
Perhaps we should look at a "defensive" stock like General Mills (GIS) . This is a straight line down since mid-February as well, but it's the last week that is incredible to me.
Yes, there are plenty of stocks that have done well. If they hadn't, the market's breadth would not be holding up as long as it has. But the majority have churned, they are not standouts. The majority are like the horses in the Derby this weekend: a whole lot of nothing going on.
If that wasn't the case, then we wouldn't continue to see this divergence between the breadth indicators that use the advance/decline line and those that use up and down volume. As I noted here on Monday, the volume indicators have not participated on the upside. And now I can show you that when we plot the McClellan Summation Index using only common stocks, we see a different picture. It rolled over this week, or at least it stopped going up. And if it rolls over from here, it will be another lower high since December.
I am still waiting for that last rally into the overbought reading, and it remains elusive. Perhaps it will arrive with the employment number, but there are far too many one-eyed horses now.
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