We had a minor pattern change on Friday. A few pattern changes actually.
First the market did not rally in the morning and give it back in the afternoon. Rather it started lower and came back. But even within that context there was not a wholesale flocking to tech and semis in particular.
It's not as though the PHLX Semiconductor Sector Index (SOX) has a bad chart but as I explained on Friday, there is a little too much love - concentrated love - for this sector so the change is welcome in my view. Even if the SOX pulled back just to the line the uptrend would be kept intact.
For a real change to take place, I would have to see the ratio of the SOX to Nasdaq make a lower low, something it has not done since October when it started this runup. But as I explained, I do not think it is healthy when there is such a concentrated move into a handful of stocks.
While we are on the subject of ratios the ratio of (KRE) (regional banks) to the Bank Index (all banks, large and small) has my eye. Let's start with the fact that the regionals have been underperforming since the October low (when this line goes down regionals are underperforming). Clearly something was afoot well before early March when Silicon Valley Bank collapsed. The market was already sniffing something was off with the regional banks.
But there is also the fact that the ratio made a minor lower low when Silicon Valley Bank collapsed but quickly regained it so that when we look at the ratio we see what is possibly a bottoming process since late January. Wouldn't that be interesting just as the whole world has decided that the big banks are the beneficiaries in this particular crisis.
Away from that not much has changed with the indicators except that while the oversold rally has been one of the crummiest ones I have ever seen, I do have to keep reminding myself that even on a closing basis, the S&P 500 is up over 3% since we got oversold.
Look at the chart of the S&P in the month of March because it is one of the tightest ranges we have seen in the last year. We are heading into the final week of the quarter with the S&P up about 20 points for the month. Now consider the news that has come out in this month.
In the month of March, we have had a banking crisis/panic. And we have had another interest rate hike by the Fed. Yet the S&P is almost flat on the month. If you had told me the news, I would not have been able to tell you that the market would be flat (or even up a smidge) on the month. Sure we can blame (or praise depending on which side you sit) big cap tech but this is the market we have. This is also yet another reason why I am terrible at narratives.
