• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

We're Due for a Bout of Volatility

After a week of a whole lot of nothing, we could be due for a bout of volatility.
By HELENE MEISLER
Sep 07, 2021 | 06:00 AM EDT
Stocks quotes in this article: QQQ

Just prior to my vacation I was looking for one more rally into an overbought condition that I had expected to arrive around Labor Day. I thought it would occur last week but it seems to have happened in one day, as last week was a whole lot of nothing in the market. After all, when the beloved PowerShares QQQ Trust (QQQ) begins the week at $380 and ends the week at $381 you know there wasn't a whole lot going on.

Statistically speaking breadth has been okay but not great. The Cumulative Breadth has still not made a higher high. Yet the McClellan Summation Index was finally able to lift itself up off the mat and enjoy some real upside. At present the Summation Index would need a net differential of -1300 advancers minus decliners on the New York Stock Exchange to halt the rise. I would call that cushion tentative, especially with the current overbought condition. Think about it like this: one decent down day could halt the rise.

The number of stocks making new highs on the NYSE made it over 200 last week for one day, before retreating. Nasdaq was a bit better with three such days. But with indexes at new all time highs, there should regularly be over 200 new highs daily.

On the sentiment front, I think we are mixed. The Daily Sentiment Index (DSI) never got over 90 last week for the S&P 500 or Nasdaq. My guess is because when the market pretty much flat lines, there isn't much to get giddy over. Yet the DSI for the VIX is at 15. As a reminder, a single-digit reading is a sign we are due a bout of volatility. It was last that low in mid-August just prior to the S&P 500 tanking 100 points in a matter of days.

The American Association of Individual Investors (AAII) saw bulls rise to 43%, up from 30% a few weeks ago. It is not extreme but it is a shift in sentiment. The National Association of Active Investment Managers (NAAIM) held steady at 94 on their Exposure, which is up from 70 a few weeks ago. So let's call these three (including the DSI) leaning toward too much bullishness but not extreme.

On the flip side is the rise in bears for the Investors Intelligence survey. At 21% it is the highest since last fall. That is a change. Also bulls are at 52% which does not speak of too much bullishness.

Then there are the put/call ratios. The 10-day moving average of the equity put/call ratio has fallen but is not yet extreme, although it won't take much to get it there.

Yet the 21-day moving average of the Index put/call ratio is now the highest in 10 years. Yes, it has been a decade since folks were so loaded up on index puts. My takeaway is that folks like their stocks but not the indexes.

In any event, here is a chart dating back to 2007. The blue box has twin peaks with the first being March 2007 and the second August of that year. Both led to approximately six weeks of rallying in the market. Of course what came after that late August rally wasn't so bullish, with the market peaking for that cycle in mid October that year.

Point A is late May 2010 which came after the Flash Crash. Note that we had a 2-3 week rally and then came back down, with the low arriving in August that year. Point B is October 2011 which was after the big move down from August when US Debt was downgraded. Point C was just prior to the election last year which was after the market had been correcting since early September.

What's different now? There has been no correction in the indexes.

For the coming week, with the overbought condition I think we are more apt to correct or at best chop. Keep your eyes on interest rates. The yield on the 10-year note is up against resistance (1.35%) and a downtrend line. A break over that could give us some volatility in markets.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Helene Meisler had no position in any security mentioned.

TAGS: Investing | Stocks | Technical Analysis | VIX |

More from Stocks

We're in the Jaws of a Bear Market, Whether You Want to Admit It or Not

James "Rev Shark" DePorre
Sep 26, 2023 4:24 PM EDT

Not even big caps like Microsoft or Apple could save the indexes -- but here's why some bad news could help shake out remaining false hopes.

Treasury Capitulation Is a Necessary Evil

Carley Garner
Sep 26, 2023 3:32 PM EDT

It is clear that interest rates are driving the ship, but that ship could be on the cusp of taking a major turn. If so, we can expect trend changes in other assets.

Williams-Sonoma Stock Jumps After Private Equity Investment

Bruce Kamich
Sep 26, 2023 1:34 PM EDT

Let's see what the charts are telling us now.

An Update on My Top Small-Cap Pick and What It Means for the Overall Market

James "Rev Shark" DePorre
Sep 26, 2023 11:30 AM EDT

The good news is that the corrective action is advancing and opportunities are developing.

Want to Bet That DraftKings Stock Has Rolled Over?

Bruce Kamich
Sep 26, 2023 10:00 AM EDT

Shares of the gambling site have weakened just as the football season gets into full swing.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:20 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading in Multiple Time Frames
  • 10:24 AM EDT BRUCE KAMICH

    This Could Get Messy

    A number of key stocks are getting close to import...
  • 01:41 PM EDT CHRIS VERSACE

    Latest AAP Podcast With Helene Meisler!

    Listen in as the Action Alerts PLUS podcast talks ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login