At least the S&P sold off in the final few minutes, to make an attempt to catch up to the crummy breadth we saw in the market the entire day. And make n mistake: Breadth was crummy with a capital C.
But this crummy breadth is the reason that for seven of the last 10 trading days we've had negative breadth. It's the reason you can see the Overbought/Oversold Oscillator, which is based on breadth is at the bottom of the page (oversold) instead of being at the top of the page (overbought). It is highly unusual to see the oscillator so oversold with the S&P up so much.
It is a divergence, and it says the only way to correct it is for the down-and-outers to catch some love. Or everything to come down together.
It continues to strike me that for the longest time, there were very few similarities to the 1999-2000 tech rally. I would get asked all the time, and I would almost always cite that breadth back then declined from 1999, right through the top in 2000, and that at least now breadth was hanging in there on a relative basis. This means it might be poor for a few weeks at a time, but it was not a continuous, daily occurrence.
It's become an almost daily occurrence for the last few weeks. Oh, sure we see one maybe two decent breadth days each week, but that's it. The trend in breadth is now decidedly down. Take a look at the red line, because that is the cumulative advance/decline line. The black line is the S&P. They tend to track each other going up and down together. But notice that since early August the red line goes down on a more regular basis and the black line is up -- the S&P has rallied 100 points since early August. That's the divergence.
It went on for months on end in 1999, but this is clearly the longest stretch we've seen this time.
I noted in Monday's column that it was unlikely we'd see much more bullishness, because the longer we go without a correction, the less bullish folks tend to get. That's the "trees don't grow to the sky" theory. Monday we saw the put/call ratio at .79, which is oddly the highest reading since July 31. So that tells us that folks are not getting incrementally more bullish up here, but more cautious.
I suppose I should also mention the volatility index. Several weeks ago, I wrote almost daily that I expected more volatility to come our way -- that the VIX should rise. But I thought with a rising VIX we'd get a declining S&P. We got the rising VIX, but not the declining S&P. I don't get credit for being half right, though. I can't explain it, but I can tell you that the chart of the VIX continues to look like it's bottoming to me.