A month ago everyone hated growth stocks and loved energy. There was so much love for energy, because it was basically the only game in town. Since then the energy names have collapsed and growth has stabilized. So, naturally, now we see folks warming up to growth stocks.
I wrote about the change two weeks ago. We looked at several indicators, but I also shared a chart of the ratio of the S&P to Nasdaq. Note it has yet to take out the low from two weeks ago (which would mean Nasdaq is outperforming by a wider margin than it has been). So far we have two lower highs, but no lower low.
We're essentially back to the either/or market. I was asked about the intermediate-term indicators and if they are overbought or oversold. Some are overbought, some are oversold. The indicators are either/or, too!
The McClellan Summation Index for the New York Stock Exchange has been creeping upward. And the word creeping should be highlighted. Notice every other push upward is like a rocket, straight up. This time it looks more like when I cycle on my bike uphill, more meandering than full force.
I think that's because breadth on the New York Stock Exchange has been so crummy. You can't crush all those industrials, energy and commodity names and think breadth is going to stay positive. The Summation Index would need a net negative breadth day of negative 400 on the NYSE to halt this meandering rise it has.
Compare that to the Nasdaq McClellan Summation Index where I use volume. The up move may not be straight up, but it surely looks more lively than the NYSE's does.
The 30-day moving average of the advance/decline line for the NYSE looks quite similar to that of Nasdaq. It leans more to the overbought side of the ledger than the oversold.
The Hi-Lo Indicator which I thought would surely zip upwards has barely budged. This is highly unusual. That having been said, I would call this intermediate term indicator oversold.
If we look at the 21-day moving average of the put/call ratio for the Volatility Index there is something curious here, as well. Peaks in this indicator typically indicate the pros are betting on a lower VIX (higher stocks) and we want to go with the pros. When it is at the lower end we see one of two scenarios play out.
First, big-cap tech goes it alone, or shall I say breadth lags a rally in the indexes. Or the market goes down. Once this turns upward it means pros are betting on a higher VIX (lower stocks).
In fact none of the put/call ratios and their moving averages are at extremes -- meaning they don't show a lot of fear -- rather they are heading down. The 10-day moving average of the equity put/call ratio is nearing the low from early June. At .64 it is not showing a lot of fear. I would say it's not a lot of complacency yet, but it is heading more toward complacency than it is fear.
The Overbought/Oversold Oscillators are leaning toward overbought as well. Remember it's the math, having to do with breadth. A few days down would take this right back to an oversold condition.
If you are searching for bottoms, you will see what you want to see in these indicators. If you are searching for tops, you will see what you want to see. This is why I said over a week ago I see a chop-fest for now.
Finally let me note that the Daily Sentiment Index (DSI) for the U.S. dollar moved to 92 on Wednesday.