There is talk of bubbles everywhere -- I keep seeing chatter about "The Everything Bubble."
I do see places with a lot of speculation -- too much speculation -- but if you think this looks like 1999, I don't see it.
The main reason I do not see it is breadth. Look at this chart of breadth from the late '90s, and notice that it peaked in 1998. It was mostly in a downtrend that year. In 1999, the year Nasdaq was up somewhere in the neighborhood of 80%, breadth was in a death spiral. It did not bottom until the spring of 2000, just as the indexes were making their highs.
I ask you to look at the cumulative advance/decline line from the current scenario. It looks nothing like 1998-2000. They are almost inverses of each other.
I grant you the breadth of the market isn't the only qualification for a bubble, but for comparison's sake, this doesn't look like 1999 from a breadth perspective. The market is not narrow the way it was then.
Having made that point, I am going to do a wee bit of complaining again about breadth. It has been good, but it hasn't been great. Let me explain.
Tuesday the S&P was up 26 and net breadth was positive 1,420. I gave that high marks. Wednesday the S&P was up 21 with net breadth at positive 870. I'd have to call that a B, maybe a B-. Then came Thursday. The S&P tacks on 55 points and net breadth is positive 700. That's a C. I'd give it a D, if it was less than positive 500, as it was most of the day. Flat or negative breadth would be a failing grade.
I think it means stocks are getting tired, as they should be. Nearly two weeks ago, just before Christmas, we reached a short-term oversold condition. Since then, the S&P 500 is up 150 points, which I would consider a good oversold rally in two weeks. And now we're leaning back toward overbought. I admit, I am surprised the Oscillator couldn't make it higher than it, has but that's the math.
The McClellan Summation Index ticked up on Thursday for the first time in a month, but know that a net differential of negative 300 (advancers minus decliners on the NYSE) would send it right back down.
Nasdaq's new highs continue to expand, but the NYSE, which saw a terrific expansion on Wednesday, saw none of that on Thursday. Either way, there are more new highs this week and new lows have not expanded and that's a positive.
But the market is now overbought and the Daily Sentiment Index (DSI) for the VIX is back at 10. The DSI for the S&P and Nasdaq is at 85, so if there is one more up day, those could go over 90 and the Volatility Index could get to single digits. I think we correct next week, if not Friday.
