Last week everyone got so excited that we were seeing value over growth. I saw all sorts of charts and graphs and statistics on how the turn had finally arrived. And then Monday shows up. Growth rallies and value dies.
Aside from that not much changed in the market from Monday's action. The Oscillator did come down from that overbought reading, as it should have.
The breadth was definitely not good but isn't that to be expected when value under performs? And as we have noted the breadth last week wasn't terribly strong so it makes sense that it was quite weak once the market reached an overbought level.
But that bad breadth continues to weigh on the McClellan Summation Index. As a reminder this tells us what the majority of stocks are doing and as you can see they have not played along during the September rally. I realize this must seem ridiculous since we saw so many industrials and energy names rally but I can't rationalize that this indicator continues downward. It now needs a net differential of +1300 advancers minus decliners to turn back up.
The interesting thing about the chart of the Summation Index is that in many ways it mimics that of the ratio of small caps to large caps. The Summation peaked in June and so did this ratio (IWM:SPY). The ratio is getting a bit stretched down here; it has barely had an uptick the entire month of September. It would not be unusual to see a short term pop in the ratio but I would remind you that in June I said I thought this ratio would make its way to the lower end of the range and I still do. The good news is that it is more than half way there!
I think all eyes will be on the 30-year yield this week. It currently sits at just over 3.2%. As you can see there is a flat resistance line dating back to 2015 that is around 3.25%. Any move up and over that and we are likely to see a big fuss being made.
With the FOMC Meeting on Wednesday -- that no one seems to be talking about! -- this is the chart to watch. It remains my expectation that a move up and over resistance would bring out many bond bears but we just haven't seen that. Not yet at least.