Rooting for a Rally in the SOX, but Is the VIX About to Get Jumpy?
The selling in tech and the semis clearly did not end on Fed Day. But we did finally see the others play some catch down. I continue to think there will be catch down for the others in August.
First of all, have you noticed that the S&P, while it has not broken the early June lows yet, has drifted down two hundred points under that 7500 area? Everyone is so focused on tech that they barely mention the S&P anymore.
Everyone is so focused on tech that I think I am the only one to point out that the financials, which now have so much love, did not even get an honorable mention on Wednesday. They should catch down. The chart of the Bank Index already has a lower high from earlier in the week.
I realize everyone is obsessed with technology stocks (heck, I have been writing about the SOX non-stop myself—I still expect a rally!) and think the market is broadening out, but it’s not. Once again, please look at the McClellan Summation Index. It has been heading south for two weeks now.
But let’s talk about the VIX. Last week, I said I wanted the VIX to get jumpy. It didn’t. I wanted Nasdaq to break. It managed to break, but it did not help the VIX get jumpy. The VIX is once again on the verge of having a breakout. If it can accelerate upwards, it can get jumpy.
The Volume Indicator sits at 49%. If we can get folks to stop hiding in the others and sell them (more than they did on Wednesday), this can fall to 47% or lower, which would make it oversold.
While we have not gotten a day where the put/call ratio soars well over 1.0, we have had nine days of persistent readings over .90. That has lifted the ten-day moving average to .95. So, at least this indicator is getting close to showing some fear.
Yesterday, I made a comment that if Nasdaq fell much more over the next several days, the Daily Sentiment Indicator (DSI), which resided at 41 (neutral), would likely fall into the mid 20s. Well, Wednesday’s action took that down to 30 in a heartbeat.
So if the VIX can get jumpy and the put/call ratio can soar, the DSI will fall into the 20s and maybe lower.
Then there are the bonds. Boy, did everyone turn super bearish on bonds after the Chair Warsh press conference. I am not a Fed watcher, nor am I a bond expert, but I can tell you that the DSI on bonds fell to 12. If bonds fall much more (interest rates rise), that DSI is going to be a single-digit midget in a hurry.
The next few days ought to be quite interesting. Maybe we’ll even get a big (high) volume day in the QQQs.
