The rebound wasn't exactly the liveliest of rebounds, was it? I believe it is because we're still in a period of up and down.
I don't think we got oversold enough to get one of those rallies that never lets you back in. And as I have explained, we are not oversold enough on an intermediate-term basis. That usually means we are living on a roller coaster with ups and downs.
Breadth was good, but nothing special. We can say the same about volume. So it was basically more of the same.
What was not the same was that the Russell 2000 outperformed the S&P 500. We haven't seen much of that lately, so that was a change. And a welcome one. The reason being not so much that the small caps need to outperform, but that there are so many cyclical stocks in that index that if we don't see the selling dry up in the cyclical names -- you know, the economically sensitive names -- then their weight will continue to be problematic.
Mostly though the day was about the move in Tesla TSLA vs. the oil stocks. A few weeks ago I wrote about this stock, noting that it was pretty much the only stock I viewed as one that was going parabolic and Monday was more of the same to me.
I will be asked where it will stop or when it will end. My experience with these types of moves is that we'd all be guessing at it. It is not an exercise on which I can offer anything more than guesswork. I can note that the volume -- not shown -- was four times the average daily volume, so if you want to know what a blow off looks like, that's it.
The flip side is the oil stocks. They look and trade like death. Oil itself broke support dating back to just after the 2018 low. The good news -- if there is any -- is that sentiment is bearish and very close to an extreme. The Daily Sentiment Indicator (DSI) is now at 16. It won't take much more selling to get the DSI to single digits and once we see single digits, we know sentiment has gotten extreme.
I believe we are in the give-up phase when it comes to energy stocks. This phase is when there isn't panic selling, but rather the sentiment turns to "it will never rally again so why do I need it?"; there becomes a laundry list of whys. Why is it in a secular decline? Why does no one want to own these stocks? Why are they poor investments?
All of that may be true, but at some point we'll have tipped the scales too far. And we're getting closer to that point on a trading basis. China is not going to be locked down forever, and we'll still fill our cars with gas. Not everyone will drive a Tesla!