The Bank Index just one week ago broke the uptrend line. On Tuesday, it sank further, a 9% slide in total in a matter of days. Hysteria ensued. And the narrative fast became recession, run for the hills.
No one seems to have noticed that since last Tuesday, the Bank Index has logged four-straight days of green now, having bounced right off that 100 level. If the rally can continue for another day or so, I think 105 is the next trouble spot.
But what really struck me was after Monday's rally all that recession talk morphed into soft landing talk. Once again let me remind you that if I had to write a commentary on why the market has done what it has done, I'd be out of a job.
While everyone was busy getting excited and rewriting narratives on the market Monday, there was very little mention that the bonds didn't budge nor did the dollar. Oh, but the Volatility Index moved. Despite having a call that the market would see a rise in volatility in early December, I have no idea what it is going on with the VIX.
I did however learn -- and I am using someone else's statistics here -- that there have been five other times when the S&P was up more than 1% and the VIX was up more than 9% on the day. All five occurred in the 1990s and the last one occurred in May of 1997. Twice the market went down the next day and three times it rose. It's only five instances, so it seems like all we can do is note it and move on.
Well ... we can note one other thing. The Daily Sentiment Index (DSI) for the VIX is 18. If we do rally stocks more. that DSI is going to fall and that is generally not good for stocks.
Another thing I can note: Breadth was nothing to write home about. Net breadth on the New York Stock Exchange was positive 870, and I did not leave a digit out. That's all there was for a day the S&P rallied 56 points. In fact, if we add up the last two trading days we have the S&P up about 36 points and net breadth has lost about 400 issues.
The McClellan Summation Index is still heading down and it now requires a net differential of positive 1,000 advancers minus decliners on the NYSE to halt the decline and obviously more to reverse it back up. So if this rally is going to last (not my view) then breadth is going to have to improve.
I would also note there was no improvement in stocks making new highs and the number of new lows increased despite the indexes being up on the day from the open.
So if I had to give Monday's rally a grade it would be a B-, maybe a C.
If the consumer price index and the "Perceived Powell Pivot" from the Federal Open Market Committee on Wednesday is going to keep us rallying, then breadth is going to have to improve or my initial take that the rally is unlikely to last more than a few days will continue to be my view.