And you thought the market couldn't go down!
It was a mere flesh wound, but it did show us that the indicators still work and stocks do not go up every single day.
But was there a lot of selling? No. It was more like a lack of buying. But let's think about this for a minute. The McClellan Summation Index, which tells us what the majority of stocks are doing, has been heading down for a month now. In that time, we have seen not one, but two rebounds in stocks after sell offs. The rebound off the June 11 whack was one and the rebound last week was another. Neither time was breadth strong enough to turn this indicator back up. There is weakness underneath.
One thing I did notice is that the Bank Index, which has been awful and is now down 20% from the June high, didn't really break down. It's in the same area it has been for two weeks. I would love to see some more downside here, because I think we might once again get some hysteria about the group, as we did in mid-May. The reason I say that is because for most of the 20% decline the banks have been ignored, as if they were just a side show and Tesla (TSLA) was all that mattered. But on Tuesday there was plenty of bank chatter. So, you know, if the Bank Index comes down toward that line-or even to fill that gap from late May (around $68) there would be non-stop hysteria about the banks.
Sticking with lines on charts, the other day we looked at the channel that Nasdaq has been in and I noted that it had failed to tag the upper end of the channel for the last month. However when it comes to the Invesco QQQ (QQQ) that is not the case. The QQQs have been tagging the upper and lower channel lines since April.
As you can see, it's almost like magic the way this channel has worked. At some point it will stop working, because nothing lasts forever. But until then, it seems to work well.
Away from trend lines there was very little change in the indicators. Despite Nasdaq being up nearly 100 points early in the day and the number of stocks making new highs is still so far from where it was in January and February. Also, Tuesday's reading of 128 new highs is far from the peak reading for this rally of 220.
In sum, I would say there was very little damage to charts on Tuesday. It would say it was simply more of the same of what we've seen for a while now. If we got some more selling later this week I think we'd see a change in the charts.