It has been almost one year since the market began its relentless rally. What strikes me most in recent weeks is how many dislocations there have been in individual stocks while the stock market indexes appear zombie-like as they sleepwalk through each trading day.
This is not to say the indexes should collapse or soar, but two-sided markets are, in my opinion, better than one-way trips. Yet in the last few weeks, the gaps up and down in individual stocks have been wild. When a stock like Merck (MRK) , a big-cap Dow name, goes from near a 52-week high to a 52-week low in a matter of weeks in a hot market, that's something.
It gapped under the recent lows and then gapped again as if it were a small-cap speculative biotech stock.
Then there is a stock like what used to be beloved Advanced Micro Devices (AMD) and has gone from friend to pariah. Not only is it down more than 20% in a week, it didn't even take a breather at $12, where it had support for the past several months. How does that happen?
There have been a fair number of gaps up as well. We've all seen Amazon (AMZN) and Alphabet (GOOGL) , but my point here is there is a lot of volatility in individual stocks but none in the indexes, which baffles me.
As for Tuesday's market, breadth improved, the best we've seen in a month. Of course, that's because the Russell 2000 rallied (of course it did, everyone finally noticed it on Monday!). But that lift in breadth still wasn't quite enough to lift the McClellan Summation Index. It is definitely heading down. It will take a net differential of +1,300 advancers minus decliners on the NYSE to turn it from down to flat, which I suppose is better than it was a few days ago when it still required +2,300.
But since this chart tells us what the majority of stocks are doing, you can see that in the last few weeks they have not kept pace with the indexes.
Then there is the issue with sentiment. The Investors Intelligence bulls are at 63.5%, the highest in decades. The bears even slipped under 15% this week (to 14.4%). That makes the ratio of bulls to bears well over 4, as you can see on the chart. In the past, this has meant a market correction. In this market, maybe it just means more individual stocks with big gaps and the indexes, yawn (yes, that's partly a joke!).
In sum, I have thought we'd get another round of volatility after that initial surge a week ago, but thus far that's been a wrong view. I remain hopeful we will still have some more volatility in early November.
For more market analysis from Helene Meisler, sign up for Top Stocks, published five times a week.