The bulls cannot believe that the bears don't see that the market is climbing a Wall of Worry. When you look at the Citi Panic/Euphoria chart and see that it is lower than October you would have to agree with the bulls, wouldn't you?
But then you look at the McClellan Summation Index, which tells us what the majority of stocks are doing and you think, aha, this explains why folks are so sour on the market. After all, we've lifted up 150 points on the S&P 500 in the last two weeks and this indicator hasn't turned upward.
Even if you look at Beloved Nasdaq and we use up/down volume instead of the advance/decline line we can see why folks might not be so bullish. Back in October through December as Nasdaq, controlled by those handful of stocks, was making lower lows while breadth (using this metric) was making higher lows. That was a positive divergence as there was plenty of buying going on in a variety of stocks.
But since the February high Nasdaq has made higher lows and higher highs while breadth is still milling around, unable to reach the February levels.
Now at least this breadth measure has eked out a move over the April high so there has been improvement but when you see the rally so clearly in January (and really from the October low) and you see this rally it's easy to understand the lack of bullishness.
If you look at the number of stocks making new 52-week highs on Nasdaq, which is hovering near 100 you can understand the bearishness. In that final quarter of the year, with Nasdaq more than 10% lower than here, there were more stocks making new highs than there are now. And there are now approximately half as many as there were in February.
In other words, to me, the final quarter of 2022 looked like a Wall of Worry with the index struggling and stocks that don't move the index climbing. This looks like a whole lot of divergences, the opposite of the fourth quarter.
But it's not like stocks are plunging. Oh sure, there are a few here and there but take a look at Action Alerts PLUS holding Deere (DE) , which had good earnings on Friday, was up rather nicely and then, wham, gave it all back. But it only plunged from the intraday high and is roughly the same price it was in early April. You can see the slow but steady grind lower in 2023. Not plunging, grinding.
Look at Industrial Select Sector (XLI) , an ETF to own the industrials. There is no plunging here. There is simply nothingness. It can't break out, it can't break down.
Here's another one: S&P Metals and Mining (XME) , the metals and mining group. The plunge was in March then came the oversold rally and since then, grinding down. You would have thought a break of $48 would be "it." But instead it mills around. Hard to be bullish on this but bearishness in the last few weeks hasn't seen much of anything either.
I think it's easy to see why folks are bearish. But until the market starts lifting more boats I would not call it a Wall of Worry, I would call it understandable. I still think a shakeup with a bout of volatility would help the market.
Note: Monday morning at 11 a.m. ET, I will be chatting with Julia Cordova on Chart Chat if you would like to listen.
(Deere is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells DE? Learn more now.)