For the last three trading days, there has been a pattern. I'll bet you can guess it, too. It's called going nowhere. Oh sure, we've sold off into the closing bell all three days, but the real story is that the overbought reading has stalled out the upside momentum.
The S&P 500 closed on Monday at 3191. Tuesday it closed at 3192. And Wednesday it closed at 3191. That is a loss of upside momentum, isn't it?
But the Russell 2000 has managed to make some progress. So that brings us back to the chart I continue to watch: that of iShares Russell 2000 Index (IWM) relative to the SPDR S&P 500 exchange-traded fund trust (SPY) . Despite the S&P going nowhere for three days and the Russell 2000 gaining over 10 points -- about .75% -- it continues to struggle at this downtrend line.
I have been waiting for a crossing of that downtrend line for weeks now, and I have been disappointed each and every time it makes an attempt. Yet breadth remains solid. Breadth was quite positive on Wednesday despite the S&P's nothingness. So why can't this relationship get going?
There were a few other items of note from Wednesday's trading. The first is that despite the flatness of the S&P, the CNN Fear and Greed Indicator is now at 87. I would say that is verging on extreme. Over 90 would be flat out extreme. I would point out it can easily get over 90 and stay there or keep going, but once it gets there, we know the runway is short until we have a correction of some sort.
Then there is the Daily Sentiment Indicator (DSI), which has seen the stock index readings back off, but surprisingly despite the Volatility Index being green for two straight days, the DSI for the VIX has fallen and is now at 17. All of this typically means we need something to shake it up.
Finally, on bonds. Yields are now at that 1.90% area on the 10-year note. I have said I think this 1.90-1.95% area is the top of the range. The DSI for bonds is now 25, so any further move up from here, especially if it goes to the upper 190s, is going to see that DSI slip under 20 and that has typically meant it's time for bonds to rally and rates to fall.
What I cannot figure out is why the Utes -- utilities -- keep going up, ignoring the bonds. The iShares iBoxx $ High Yield Corp Bond fund (HYG) and the SPDR Barclays Capital High Yield Bond ETF (JNK) are flying. So is the iShares S&P U.S. Preferred Stock Index fund (PFF) . I am certain someone will tell me it is year-end stuff, but to me that is rationalizing an indicator, something I prefer not to do.