I read an interesting discussion on Thursday. It was about how, with the advent of Twitter (TWTR) and everything on the internet being so instantaneous, market players feel the need to be spot-on every minute of every day -- and that's just not possible. I believe the person who wrote this is dead right.
The folks on television have also perpetuated this, making us believe that they caught every bottom and every top in every market and every stock. Let me state right here and now that if you think I am going to get the exact high and exact low all the time, then you should probably stop reading now. If it happens, then consider it pure luck and nothing more.
I thought of this because earlier in the week I said that the window for a rally is still open this week, because we were not yet overbought on my own oscillator. It gets overbought at the end of trading on Friday. The window was open because of that. In a minute, we'll check in on how the indicators fared during this period.
I also thought of this because the Nasdaq Momentum Indicator will get overbought Friday, as well. Just prior to my vacation, on March 7, this was one of the indicators I highlighted as getting oversold. It did not match up perfectly, it was a day late, but it has caught the bulk of the rally, as you can see.
In any event, what I've done here is walk Nasdaq up another 200 points in the next week -- and as you can see, starting Friday the indicator heads down. Remember these are momentum indicators, so they are telling us when the market loses upside and downside steam.
I also thought of this because the Daily Sentiment Index for Nasdaq jumped to 95 on Thursday. This is the highest reading since January 22, 2018 when it was 97. There was still another week to go in the rally after that before it corrected.
So here again, earlier this week Nasdaq's DSI reached 90 -- and I guess because the market has not collapsed ASAP, everyone has begun to scoff. Let me report to you that the 95 reading might not take Nasdaq down the very next day, either, or the day after that, but if you think 95 means there is a lot of runway left without a pullback, then we see the market differently.
To put this in perspective, on December 24 -- in the morning, so not at the low but 60 points above the low in the S&P -- the DSI for the Volatility Index was 96. You had one more nearly-3% down move before that DSI reading mattered. But it did matter.
As for the statistics for the week, the number of stocks making new highs for both Nasdaq and the NYSE are still below their recent peak readings. The McClellan Summation Index is actually still heading down, despite the new high in the S&P. In fact, on Monday March 11, the S&P added nearly 20 points and net breadth was +1700, which I thought was a good day. On Thursday, the S&P added 30 points and net breadth was +1250. I think that is not a great day.
I think the market is set to pull back next week, especially the Nasdaq. Perhaps my timing will be wrong and everyone will yell at me. So be it.