Who doesn't know breadth has been terrible? You have to have been living under a rock not to know. A month ago the S&P 500 was trading pretty much right where it is now. In that same time period (21 trading days) breadth has been positive exactly six days. That adds up to less than 30% of the time the majority of stocks were up.
But here's what I'll bet you might not have realized: The Russell 2000 hasn't been crushed in that time frame either. It's down a bit more than 1%. That's unusual.
Another unusual event in the market is that last week the Dow Jones Industrial Average was red every single day. Oh sure we often get five red days in a row but it's not very often we get Monday through Friday. Since 2010, it's happened 11 times which averages out to less than once a year. But that's what happened last week.
The Transports also rarely go five consecutive red days on a Monday through Friday but that too occurred last week. Of those 11 instances where the Dow was red Monday through Friday, there were two times the Transports were as well. Yes, I know it's only two instances but the dates caught my eye.
One time was the final week of February 2020. We all know what happened in March 2020. But the other time? It was the final week of July 2011. That was the last time the debt ceiling debate was as front and center as it is now. In early August 2011, US debt was downgraded and the S&P 500 fell a quick 10%.
You might notice that the S&P 500 had been struggling for months to get through 1,350, much the same way it has been struggling to get over 4,200 now.
But was the Invesco QQQ Trust as hot then as they are now? Turns out they were. Look at that minor breakout that failed, after a few months with a lid up there.
I am not a fan of analogies. I often say that somehow these analog charts always end up in a 1929 Crash but I would be remiss not to note these interesting similarities since if we get a bout of volatility in the latter part of May, I believe sentiment would get bearish in a hurry (as opposed to the complacency we've seen). Look how fast the Citi Panic/Euphoria Model has pushed right back to Panic.
It would also arrive as the intermediate term indicators are already working their way from the overbought reading we got two weeks ago toward an oversold reading. Just notice that the Volume Indicator which was 53% is now at 49%.
Or the way the 30-day moving average of the advance/decline line has started to back off from that early May overbought reading. It's already crept back under the zero line.
In the very short term, we're a bit oversold (the Dow has been red for nine of the last 10 days and breadth has been negative for eight of the last 10 days) so let's see if the market can shake things up in the latter part of the month to move the intermediate term indicators back to an oversold condition.
