So Nasdaq made a new high. How great is that? I mean, it is really awesome when Nasdaq makes a new all time high and there are fewer than 100 stocks that make new 52-week highs isn't it?
Back in January, when the market was cruising right along, there were nearly 400 stocks making new highs on Nasdaq. Now we have 25% of that number. Heck, we can't even get the reading of new highs up to where it was on June 1, when there were 133 new highs. That is a divergence, and not a small one.
But as I watched all the speculation in the market take place -- and yes there is plenty of speculation out there -- I once again thought of the early 2000s. But I did not think of tech, but rather the Transports. Airlines have been hot stocks lately and we can't look at the individual issues, because they have been bankrupted and merged and so forth in the last two decades, so let's look at the Dow Jones Transports since they contain the airlines.
If we exclude 1999, when the Transports literally couldn't find an uptick and begin in the year 2000, we see a fairly steady trading range where the lows are higher and the highs are pretty much equal. The 9/11 plunge in 2001 is evident on the chart, even without an arrow.
But look at that rebound: Up 50% in a few months -- sound familiar?. Right back to the prior highs. Then look at the long, drawn out decline over the ensuing year, back to the lows, oh yes, retests can happen, and often do after many months.
Now, look at the present day. From late 2018 until early 2020, the Transports saw rising lows and flat or similar highs. Then came March and they plunged. They have rebounded nicely, too. In the 50% range as well.
If you want to know what it will take to see deterioration underneath, then let's drill down on one of those Transport stocks, one I have been chatting about here daily, American Airlines (AAL) . That peak at $22 is what to pay attention to. So far it has had a mere correction off the peak. That's normal. But if AAL now rallies again and cannot take out that peak before turning down one more time, then we are likely to see deterioration.
That's because AAL will not be alone. All those stocks that have had terrific runs of late -- all those stocks that have helped breadth be so good -- might have similar moves. And if that happens, that's when we'll see the deterioration underneath.
In my view, we have the seeds of deterioration planted for Nasdaq because how can you have a new all time high and fewer than 100 stocks at new highs? Or a new all time high with breadth negative on the day or net volume negative on the day? The seeds have not taken hold and grown yet though. If they do grow it would be evident in the indicators rolling over.