I think Thursday was a bit of a Realization Day.
For months I have noted that when big-cap tech is strong, everything else seems to be weak and vice-versa. The two cannot live together for longer than a day or so. I have called it the "Either/Or Market." All of a sudden on Thursday, it was like a light bulb went off and folks realized this has been the market we have.
The first step toward changing that pattern is when everyone realizes it is so. I imagine we will see more of it but, Thursday felt like a strong start to it.
Perhaps it was because the S&P 500, while up a buck or so at the close, had some of the worst breadth we've seen in ages. Net breadth was negative 700 on the New York Stock Exchange. What's more, upside volume, which you might recall on Wednesday clocked in at a mere 50%, was 40% on Thursday. That's two poor showings back-to-back, which is probably why they noticed it.
Or maybe it was because the Russell 2000 lost nearly 1% on the day. Or was it because the Bank Index is now down 5% in a week? Or the oil stocks as represented by Energy Select Sector SPDR Fund (XLE) find themselves down 7% in a week (oil services are worse). Whatever it was, folks finally noticed the leakage underneath.
We have a new high in the S&P with just about 200 stocks making new highs. I will call that unimpressive. Over on Nasdaq, where it seems special purpose acquisition companies have taken over in full force, we see that the new highs are about half of what they were a week or so ago, despite Nasdaq being up 500 points since then.
Yet Nasdaq volume remains impressive. Breadth was terrible, using the advance/decline line (it was negative) but upside volume was around 70% which isn't great but it surely isn't bad, and is nowhere near the readings we saw on the NYSE.
And of course the number of stocks making new lows remains non-existent.
When it comes to sentiment, the American Association of Individual Investors (AAII) had the fewest bulls since pre-election and the most bears since then, as well. So with the exception of my Saturday Poll, this is back to being an outlier.
For the National Association of Active Investment Managers (NAAIM) we find their exposure to the market chiming in at 113. Yes, that means they are leveraged long. It is the second highest reading on record. The prior reading (not clear on the chart) was at 120 on the final day of December 2017.
The 10-day moving average of the equity put/call ratio is back where it was in early- to mid- December. You probably don't recall and it's hard to see on a chart but an awful lot of stocks corrected from that point. I would remind you that we were down enough from that point that we were oversold heading into Christmas and you don't get oversold by going up, you get oversold by going down.
Finally the Daily Sentiment Index (DSI) is at 88 for Nasdaq, so once again we find ourselves considering that one more up day for Nasdaq and this will go over 90, which is a short-term red line for Nasdaq.