Now that's what I call a better rally. Better because breadth was so good. Better because breadth was the best it has been since early October.
Yes, I know all those growth stocks faltered and value thrived and clearly that makes folks a little more nervous. You see, that's because it was the first day with a relatively high put/call ratio on such a big up day.
The curious part about the breadth is that the minor higher high in the S&P 500 saw the cumulative advance/decline line fail to make a new high by just a little bit as well. I am willing to give it a bit of leeway, because both were squeakers, but I think it continues to show us that breadth has not been leading as it had been. It shows us that at best it's keeping pace.
The McClellan Summation Index did finally stop going down, but it took a 100-point rally in the S&P to get it just to stop going down. That usually means there will be another pullback. I think that is likely late this week or next week.
We see this in the number of stocks making new highs, as well. There are far fewer new highs than there were the last time the indexes were at their highs. The S&P has about 100 fewer new highs and the Nasdaq has about 200. Some might be willing to excuse it because of the growth stocks stalling while the value stocks rose, but that is rationalizing an indicator. New highs need to improve.
The good news is that oil finally saw sentiment get bearish enough to have a rally and Tesla (TSLA) finally had a dose of reality. And of course the banks rallied. The ratio of the Bank Index to the S&P bottomed -- finally -- last week and has now made a one-week high. I think this turn is a positive.
The Bank Index itself is coming up toward some resistance. I am torn as to whether or not it crosses over the line and then retests it (drawn in blue) or if the line is resistance on this trip up and the Bank Index pulls back from here. But I think the improvement in the ratio says the pullback should be shallow.
Another reason I am still in the pullback camp is that the Daily Sentiment Indicator (DSI) for the Volatility Index (VIX.X) is now 12. Any further rallying and it is likely to get itself back to single digits and single-digit readings in the VIX have tended to lead to rallies in the VIX. And rallies in the VIX are usually accompanied by sells offs in stocks. A "W" pattern would help in a big way.