What I found most interesting about Tuesday's action was not statistical. It was how many seemed to wake up and notice that so many groups have been so crummy for so long.
Several weeks ago I complained right here on these pages about the chart of International Paper (IP) . My question was, if the economy is so good, why is a very economically sensitive stock acting like death? I recall the responses I got when I posed that question. Keep in mind this was when the FANG stocks were still cooking upward.
I was told paper didn't matter in an internet economy. To which I asked, what do your Amazon (AMZN) packages come wrapped in? Mine come in cardboard boxes. What of lumber? Don't we use wood to make houses? No, there was a laundry list of reasons why that too didn't matter.
Take a look at the chart of International Paper. About the only good news for this chart is the measured target is nearby at 42.
But you see, with stocks like this collapsing on Tuesday there was a lot more chatter about materials stocks, industrials and housing stocks. It's as if the news from PPG (PPG) was needed before folks were aware of how crummy stocks have been acting. The McClellan Summation Index does not go down in a straight line when the majority of stocks are doing fine; it represents what the majority of stocks are doing. It has been a one-way street since we hit September.
Then there are the Transports. Perhaps folks were too concerned over the names that are so down and out to notice how poorly the Transports act. Just over a week ago I drew in the head and shoulders top. It measures to 10,900-11,000 but so far there is not the same hysteria over them that one would expect.
In the last two days the NYSE has been what I would consider oversold yet the S&P has lost five points and the Russell 2000 has lost 11 points. Oversold markets should rally but so far these markets are not doing so.
What of Nasdaq? I noted Monday that it is not yet oversold and my best calculation was it would take about another week. I can now tell you that the window for the Nasdaq Momentum Indicator to reach an oversold condition is Thursday to Tuesday. When I walk Nasdaq down over 100 points in the next week, the indicator stops going down during that time frame, with Tuesday seeing a sharp rise even with Nasdaq down. That's what makes it oversold.
The timing of that is interesting because the Hi-Lo Indicator should be under 15% by late this week/early next week. Perhaps we'll even get a strong sentiment shift in that time. Last week the Investors Intelligence bulls were too high (and therefore bearish) at 62.8%. This week they have backed off considerably to 56.3%.
In any event, the S&P has now been red for four straight days. It hasn't gone more than that in almost two years. Because I would like the market to break so we can get panic it will probably get saved.