It never ceases to amaze me. Folks swore two weeks ago -- when banks were on their lows and the work-from-home stocks were all anyone cared about -- that banks were dinosaurs and technology was the be-all and end-all. And now they say that they have spent the last two weeks buying value and selling the work-from-home stocks.
That may very well be true, but it sure wasn't true two weeks ago.
We even looked at the Bank Index at the depths when I noted the hate for the banks were sky high and no matter what you thought of them, they deserved a bounce.
What strikes me on the chart of some of the individual stocks is the volume did not start until the last two trading days. Look at that volume on JPMorgan Chase (JPM) . With the exception of the March and April trading period, it's hard to find two volume days like that.
Bank Of America (BAC) is similar, if not more pronounced.
I admit I am not sure if it is real buying or short covering, but that volume makes this rally very different than any of the others. JPM is now at resistance and while BAC has gotten through, it will encounter some near that gap at $26.50-$27.
Now let's talk about the upcoming overbought reading, because it probably pertains to these stocks that have been in the spotlight this week.
The McClellan Summation Index is still rising, which is positive for the market. But it will now take a net differential of negative 4,100 advancers minus decliners to halt the rise, which means it is overbought. When this indicator reaches a point where it needs negative 2,000 to change the direction, it has stepped a toe into overbought territory; at negative 4,000 or greater it is solidly there.
Then there is my own Overbought/Oversold Oscillator. It is based on the net of the advance/decline line. What I do is look for a point when we look back at the last 10 trading days to see if there are a lot of red readings (negative) or positive readings. A long string of negative readings to be dropped means the market is oversold. A long string of positive readings means the market is overbought.
When Friday comes around, we will be looking at dropping exactly one red day going forward. That makes the market overbought as we head into the weekend.
The table below shows the numbers to be dropped beginning Monday.
So maybe this is the great rotation everyone thinks it is. But the market as a whole is coming up on an overbought condition that I think makes next week likely to be more difficult than this week. Probably with another bout of volatility.