Tuesday's rally did very little to change the indicators. But let me tell you what did change: breadth. It was the best breadth day we've seen in nearly six weeks. We haven't seen breadth this strong since just after the July 4th holiday.
It wasn't strong enough to turn the McClellan Summation Index upward. That would need another great day of breadth readings. Thus, the rally still did very little to change the indicators.
Overall breadth, as noted here last week remains positive as it hovers near the highs. It's the derivatives of it that are weak. How is that possible? I can't say because it is highly unusual but I tend to go with the swings in the Summation Index because it tells us what the majority of stocks are doing.
Speaking of what the majority of individual stocks are doing, I was asked an interesting question that I would like to share with you. The question was if the number of stocks making new lows looked any better if we removed ETFs. I used to pay close attention to the common stocks only statistics because everything was so skewed by bonds and all the bond proxies out there but since bonds have gone into this wide trading range these bond proxies don't tend to move the needle very much and therefore the statistics we get using "everything" tended to be the same as the "purer" ones.
Yet I fully admit I was very surprised to see the number of stocks making new lows, using common stocks only is downright awful. There were 81 new lows on Monday which equals what we saw in late June. It also equals what we saw in early and late March.
Now take a look at when we throw everything that trades on the NYSE into the mix. It actually looks better on a relative basis. Monday had 117 new lows and in late June we had just north of 150 new lows. In mid-March we had over 200 new lows.
This essentially tells us that individual stocks are stinking up the joint, doesn't it? On the whole they act worse than they have during the other declines.
However as I noted in yesterday's column, we're on the hunt for when/if the number of stocks making new lows contracts and on Tuesday we saw a minor contraction (not shown on the charts above). It doesn't count as a positive divergence because you need to see a lower low in the indexes for a true positive divergence but at least the new lows stopped increasing for now.
The market continues to show divergences as not all stocks are indicative of what the indexes are doing. A good oversold condition usually takes care of that though.