I want to begin with a story. Someone sent me a note and asked me about the chart of Abbott Labs (ABT) . The person had heard several technicians discussing the island at the top and wanted to know if that was a valid pattern.
I admit, I had to squint at the chart quite hard to see it. In case you are struggling as I was, it's that three-day period over $90 in mid-January (arrow on the chart).
After I said that I obviously didn't see it as clearly as the others did (perhaps I am too old and need new glasses), I advised that what he should really do is step back and draw in an uptrend line. It doesn't have to be perfect. By that I mean not every low or point must connect, but was the basic trend up? In this case it sure is.
I told him that in another market, the lower high last week would be cause for concern because it meant that the stock wasn't keeping pace with the market. But in reality, aside from that, what has the chart done wrong? Nothing. If it breaks that uptrend line, then it would be very concerning.
So why did I want to tell you that story? Because it seems that everyone is concerned that their non- technology stocks are as vulnerable as industrials and energy stocks, which have been disasters in the last month. It's as if we have two markets: Tech stocks are giddy, everything else is concerning.
And you can understand that. I mean, breadth was terrible during Monday's trading session. The S&P 500 was up 24 points and net breadth was positive 500. Net volume (up minus down volume) was basically flat. So buying power equaled selling power on a day the S&P was up 24 points. The cumulative advance/decline line did not make a higher high.
Over on beloved Nadsaq the number of stocks making new highs continues to contract while the new lows expand. In fact new lows are now knocking on the door of 100.
But the chart I struggle with most is the McClellan Summation Index for Nasdaq. Here I use volume because I feel it is more useful than the advance/decline line for Nasdaq. The divergence in the last week is breathtaking with the indicator plunging and the index rising 5%. Look hard at that chart, it's hard to find another period where this has happened.
So I know everyone is now on board the Tech Train and how the Fab Five will keep on going forever and a day, but that trade is feeling a bit one-sided right now. I can still see getting more ups and downs. Notice we haven't had a quiet move in the market in weeks.