Was Monday's decline similar to last Monday's decline? After all, both times we saw a total lack of selling once the initial drop happened.
We can make the case that last Monday and this Monday, the selling was in the big-cap index movers and not in the rest of the market. Breadth was in line with the decline, but for the New York Stock Exchange, 54% of the volume was on the upside this week, while the S&P was down 25 points.
Over on Nasdaq, where last Monday saw a decline of 190 points and up volume chime in at 65%, this week saw a decline of 165 points and up volume at 65%. So, yes, it is similar.
What is different? What is different, at least to me, is that last week we were not yet overbought. Last week we were still decently oversold, as we were working off that oversold reading form just before Christmas.
Another difference is that the McClellan Summation Index has not budged in a week. Please look at that surge in the Russell 2000 (brown line) and then look at the Summation Index (blue). That is highly unusual for the two to diverge so much, but that's what we've got.
But let's talk about the pattern that has developed in the S&P over the last few months. Overall it has been upward since that late October low, but let's focus on how each month has developed. In November, we had that big Pfizer (PFE:NYSE) vaccination news that was given back pretty quickly. So, we had a rally the first two weeks of the month, and then we went sideways for a few weeks. That arrow on the chart is the last time-just prior to Thanksgiving-that my weekly Saturday poll on the S&P showed the majority looked for the following week to be down.
So we rallied in the last week of November and the first week of December. And then we went sideways for the next few weeks. Again, we got oversold just prior to Christmas and we rallied for two weeks. Will the pattern of the last few months hold? Will we get some sort of sideways or a correction in the middle of the month? I think so.
Overall, there was not much selling in the market on Monday, which is similar to last week, but I think it was easier for us to renew the rally last week, because we were not yet overbought as we are right now.