I had a laugh when I read today’s market commentary by my favorite market statistician, Jason Goepfert (www.sentimentrader.com).
His commentary was “We’re seeing market readings that we’ve only seen a few times in history. If ever. The S&P 500 surged to a new high, but was powered by the third fewest stocks in 27 years. The Nasdaq is more extreme, and its move is comparable to other blow offs.” He goes on to say: “I dunno. I don’t get it. The only way to describe the equity market is one that is one that is in the midst of melt-up type conditions”. Mr. Goepfert is a math guy – he tends to be very neutral and fact based with his comments. That’s what made his “I dunno” preface so funny – yet not so funny at the same time…
More stats, this time from technical analysis guru Don Vialoux at www.timingthemarket.ca
“Technical action by individual S&P 500 stocks was slightly bearish last week despite new all-time highs set by the Index. The main reason for new index highs was strength in a handful of stocks (mainly high tech stocks). Notable among stocks breaking resistance surprisingly were Utilities. Notable among stocks breaking support were Consumer Staple and Health Care stocks. Number of stocks breaking resistance totaled 50 while number of stocks breaking support totaled 64. Number of stocks trading in an uptrend dropped to 291 from 305, number of stocks trading in a neutral trend dropped to 71 from 73 and number of stocks in a downtrend increased to 138 from 122. The Up/Down ratio dropped last week to (291/138=) 2.11 from 2.50.”
Finally, my humble take, based on my short termed timing system:
As readers may recall, I got a ‘sell” signal from my short termed timing system on October 12th. I noted that signal here.
A little over a week later (last Wednesday October 25th, to be exact), the S&P 500 staged an enormous, huge, massive pullback of less than 1%. Please note how firmly my tongue is planted in my cheek as I write this. Then, almost apologizing for its brief interruption of the nonstop upsloping train, the market proceeded to put in new highs….. again.
Above is the updated chart since that sell signal. Note that the two momentum indicators (RSI, stochastics) are no longer overbought. I guess the above noted gigantic pullback took them out of that overbought status. Yet they have not demonstrated their typical pullback into the “50” or less zone after signalling a sell. This is unusual – as you will note on the chart after prior red vertical sell signal lines.
Perhaps there will be a bit of softness or sideways action to bring them back into their typical neutral zones after the recent sell signal. Sharp-eyed readers will also note that the market is climbing the top Bollinger Band. Historically – that by itself is not a problem if momentum is not overbought.
Given the above, like Jason Goepfert, I might add my voice to the “I dunno” camp. I’m cautiously stepping into the market given my seasonal discipline. But its important to be diligent and think defensively in this environment.
Keith on BNN MarketCall 5:30pm Tuesday Oct 31 (Halloween special, staring..spooky markets)
I’ve been asked to step in for tomorrow’s 5:30pm MarketCall show on BNN. Given the above–there are plenty of scary things to talk about on this halloween evening call-in show! Phone in with your most horrifying questions on technical analysis for me during the show. CALL TOLL-FREE 1-855-326-6266.
Keith Speaking at the CSTA Conference this Saturday Nov. 4th
Place: Toronto CFA Society. Suite 2205, 120 Adelaide, St. W
Time: 3:30 pm
For details: https://csta.org/
Good morning Keith,
I have been watching the stocks that are making new 52 weeks high. Few equity stocks are making it. What I do notice though, is the number of etfs making new 52 weeks high. I don’t know what to take from it. Confused!
depends on the ETF sector
Also–an etf can imitate an index, which by itself may be cap weighted–so the few stocks driving the index make the ETF hit new highs despite low breadth
BTW–I will talk about this on BNN at 5:30 pm today (Tuesday (Oct 31) if you can tune into it.