You know what we did not hear on Monday? How fabulous the semiconductors were. And do you know why? Because the Nasdaq's PHLX Semiconductor Sector index (SOX) was down a percent. And that means it really did underperform Nasdaq.
I showed you this ratio chart Monday, but now I want to show it to you with a line drawn in. That line has been in place since July, so I think it's pretty important. It's always hard for me to imagine that markets will go up or down in a straight line, so at some point this should bounce, but right now that uptrend line is important, especially since, as I noted, everyone seems to be "all in" on the semis.
No sooner did I praise breadth from Friday's decline than I find I must take back that praise. Monday's rally did see breadth green, but it was not the least bit impressive. Let's review. Friday saw the S&P 500 lose 23 points with net breadth on the New York Stock Exchange at negative 150. There is no way you can call that bearish. When breadth outperforms like that, it's a positive.
Monday's rally, however, saw the S&P gain 11 points and net breadth was positive 210.
I hope you can see how unimpressive that is. But the McClellan Summation Index hasn't rolled over yet. That would require a net differential of negative 200 advancers minus decliners on the NYSE. On Dec. 27 that number was negative 2,000. So despite the that the S&P is trading essentially where it traded on that day, the cushion is now considerably less for this indicator.
Remember, sentiment has not changed much in the last few days. It remains quite complacent still. So if we lose breadth indicators, then I think we can expect a correction that lasts longer than a day.
Finally let's turn to Gold. I have liked it since around Thanksgiving and despite that it did not map out as I had drawn in, it has done rather well. That pattern it broke out from measures into the $148-$150 area for the exchange-traded fund, SPDR Gold Trust (GLD) , which poked its head into on Monday. The Daily Sentiment Index (DSI) for Gold was 30 when I first warmed up to it and the DSI is now 83.
A reading of 83 is not extreme; Gold's DSI got to the mid-90s in the August rally, but it is leaning on the high side. If the DSI gets over 90, then I would have to sour on gold. For now, I'd say I'm neutral, since it has hit the lower end of the target zone.
Finally on bonds, it has been my view that interest rates are in a trading range, mostly between the 1.90% area and the 1.70% area. Sentiment hasn't been a big tell, since it's been fairly neutral, but I would note that there is now an uptrend line that comes in at the same support level of 1.70%, so a break of that level measures down to the 1.50% area, putting more significance on that 1.70% area now.