We all know sentiment is beyond giddy, beyond enthusiastic. Like Buzz Lightyear, it has gone to infinity and beyond.
But what about breadth? Breadth has been fine. As I have noted, breadth is no longer leading, but it is huffing and puffing and keeping up. That alone makes this market different than those we have seen in the last few years.
It's momentum that has slowed. The Overbought/Oversold Oscillator is the clearest sign, since it couldn't even lift on Thursday with breadth at two to one. And let's face it, a lot of the stocks that were hot in November have been doing a lot of digesting these last few weeks.
I have cited the beloved Industrials using Industrial Select Sector SPDR Fund (XLI) , which are the same place they have been for weeks. Or the transports. To that, we can add the banks or even the semis. Just look at the PHLX Semiconductor Sector relative to the Nasdaq. That rarely happens in an upturn. But notice back in August the same thing happened. The semis underperformed Nasdaq in that last run up into early September.
I bring this up because for the third straight day Nasdaq's DSI is over 90. It is now 94, which is the highest since just before that massive decline in early June. It is also the last time we had three consecutive days over 90, since that late August run up.
Then there is the 10-day moving average of the put/call ratio. Look how much it has moved up in the last week or 10 days. Now, notice that doesn't tend to happen in a rising market, but rather a falling market.
The market just seems to be moving along while certain aspects of the market that had been in gear have tailed off. Yet breadth as I said hasn't turned sour, it has simply stopped leading, which isn't a negative, just a change.
I saw someone do a poll on Twitter on Thursday regarding the Volatility Index. I was curious, because so much has been fussed over regarding the fact that the VIX refuses to go under 20. The question was if the VIX would go sub 20 before year ends. I did not see the results of the poll, but the question got me thinking: How odd is it that the VIX can't seem to break 20, and yet the put/call ratio for the VIX is still so slanted toward folks buying puts on the VIX.
I consider the VIX options buyers the smart money, so their trade is not contrary, yet in the last month, the VIX hasn't exactly been collapsing. Then, I noticed that the DSI for the VIX is back at 13. A single digit reading for the VIX coupled with a reading over 90 for Nasdaq tells me it's unlikely the VIX is going under 20, and if it does it will be short lived.
Let me finish by noting that the dollar is getting a lot of airtime this week, as it broke to a new low. The line I drew suggests a bounce. So does the fact that the DSI is now at 9. It might be next week due to the weekend effect, but I would think a bounce is in order.