Have you ever taken someone to a party and all she did was complain? You know what I mean. The food isn't good. The wine is bad or the beer is too warm. The music is too loud. Everyone is drunk. Well I have become that person. Everyone is at this party we call the market, and all I can do is complain.
I really would prefer to love this market. As a slave to my statistics and indicators, however, I simply cannot.
Let's start with Monday where the S&P 500 eked out another close that was a point and change higher - yet breadth was a net negative of 400 issues.
That means the McClellan Summation Index - which tells us what the majority of stocks are doing now - needs a net differential of positive 900 advancers minus decliners to halt the current decline. To put that in perspective, Friday's rally only saw positive 720 net issues.
And that also means breadth did not make a higher high on Monday. But I can live with that considering the S&P 500 was only up a point and change. The Summation Index, however, shows a trend and that trend is diverging from the major index.
The number of stocks making new lows expanded yet again. Nasdaq had 133 new lows and the New York Stock Exchange had 77. Again, one day is not a big deal, but that's now five days where Nasdaq, at all time highs, has triple digit readings for the new lows. I grant you this might be because of the end-of-the-year tax loss selling, but I ask you why aren't the new highs expanding on a daily basis?
On Nov. 4, Nasdaq impressed us with an expansion in new highs to 248. Now there are 169. Nasdaq is up 150 points since then. So what happened to those 80 stocks? And why aren't we picking up more? Are people leaving the party?
The NYSE had 115 new highs on Monday. On Nov. 4, it had 214. Those 100 stocks must have snuck out the back door when we weren't looking.
And take a look at the Overbought/Oversold Oscillator. This is based on breadth. It has been steadily falling for two weeks now. It is now below the zero-line. Breadth has been negative for seven of the last 10 trading days, so I suppose we can say the small caps (which have responded to the Oscillator by pulling back) are getting oversold. But what kind of strength does this show?
We've discussed sentiment, where the 10-day moving average of the put/call ratio is now rising, something that often precedes a pullback.
We've also discussed the Daily Sentiment Index (DSI) for the S&P, which tagged 90 last Friday and 91 for Nasdaq. Each one of those lost a point on Monday. But the Volatility Index saw its DSI drop to 10. So clearly there is a high level of complacency in the market.
All I know is that the party is thinning out. Many have gone home. So, either they need to come back to the party to make it more interesting, or we all need to go home get some rest so we can party again later. In the meantime, I am a party pooper.