You know I have to begin with a discussion on the breadth, which was terrific.
Do you also know that it was terrific on Wednesday, July 15?
It was a decent day of breadth on Friday, July 10, as well.
Do you also know that it was pretty good on Tuesday, July 21?
And each time in the days thereafter, the market managed to dribble back that good breadth -- like one-day wonders. It is quite evident on some of the charts.
When I was a small child my grandmother used to play this game with me where she would put her hand down on the table and I would place mine on top, then she would put her other hand on top of mine and so on. And then when I wasn't thinking about it, she would pull both hands away and leave me hanging. That's how I feel about the breadth of the market and the down-and-outers. They keep sucking me in and lulling me and then they just pull the rug out.
Well OK, they don't exactly pull the rug out like my grandmother did. It's more like it dribbles down, in what we used to call eighths and quarters and would now call nickels and dimes.
Just look at the chart of one of my favorite down-and-outers: the Bank Index. July 10 it had that great lift from 70 to 73 and spent the next week chopping about (green arrow). Then last week it rallied early in the week and there was no follow through again (blue arrow).
Ultimately, this should form a pattern that leads to a lasting rally, since we have higher lows (but no higher highs yet). But so far, it's like playing "hands" with my grandmother where each time I look away it dribbles right back down.
The interesting thing is if you look at the chart of the Russell 2000 Value vs. the Russell 2000 Growth, it has been making higher lows for three weeks now. But is that because the value stocks are improving or because the growth names have been stalled? Didn't it do the same thing in late May heading into early June?
The one thing we have learned in the last few months is that growth and value cannot seem to play well together. They can rally for a day or two together but ultimately it can't last or hasn't been able to last. This means late this week is a big test. The Invesco QQQ (QQQ) did in fact bounce off that line, perhaps not with the same vigor we have seen in recent months, though. The reaction to the earnings of the major players in that group will tell us if this line can hold.