I live in a condo, and as anyone who lives in a condo knows, you might be friends with some neighbors, but most of them are the sort whom you pass by, nod, say, "Hello," and exchange pleasantries, and move on.
On Thursday, I was in the mail room and saw one such neighbor. We nodded, said our pleasantries as we passed each other, and then he stops, turns around, and out of the blue, asks me what I think of Tesla's (TSLA) stock. I was quite taken aback, since this is not the typical mail room chatter.
He went on to say something about how a new model is coming out, and so on, and, asked whether I think the stock is a buy. I just stared at him, quite surprised, and asked him if he really wanted to buy a stock that had just doubled.
I share this story with you, because I cannot recall the last time someone -- other than my mother that is -- inquired about the stock market in such a fashion. And -- to want to buy a hot stock that had recently doubled!
I think this market is vastly different than the one we had the late 1990s, but as I walked up the stairs after that encounter, all I could think of was the lady I met on an airplane from New York to Minneapolis in January 2000, who saw me writing my hand drawn charts and asked me what I thought of Dell (DELL) , because, you know, Nasdaq was up 85% that last year, she said.
I won't get into an extended discussion about why I think this market is so different from one of the late 1990s, but I will show you a chart of the Cumulative Advance/Decline line from that period that shows the peak in early 1998 and the downward trajectory through those two years. That is simply not the case now -- not yet at least.
And yes, I spent an awful lot of time complaining about breadth in 1999.
So let me note that while the cumulative advance/decline line made a new high on Thursday, the showing it put in was nothing to write home about. Wednesday's nearly 16 point rally in the S&P 500 saw net breadth at positive 550. Thursday's 21-plus point rally in the S&P saw net breadth at positive 350. So, the cumulative breadth line gets added to, but not in a great fashion.
That means the McClellan Summation Index is still flat. It still needs another positive day to get it rising again. It's difficult to get excited over a market where breadth is no longer leading.
In case you missed it, the Russell 2000 is the same price it was just before Christmas. That means the ratio of iShares Russell 2000 Index (IWM) to SPDR S&P 500 ETF Trust (SPY) has tumbled in a big way. The only good news here is that it is back to prior lows.
Then there is sentiment. Not just the anecdotal evidence above, but the Daily Sentiment Indicator for both Nasdaq and the S&P are at 90. The Volatility Index (VIX.X) is at 7. The last time the S&P's DSI was 90 is the black arrow on the chart. The blue arrow is the last time the VIX was this low.