Tech Stock Performance Has Blinded Investors to the Rest of the Stock Market
I’d like to be able to report that the Either/Or Market has finally slipped away, but I cannot. What I can do is tell you that, anecdotally, I see many who ignored this fact of the market’s behavior for so long are coming to grips with it. And boy, they don’t like it when the others get the love.
Of course, I cannot understand how someone could have been so blind to the Either/Or Market, but I suppose when you are primarily invested in high tech/semiconductor stocks, and the S&P holds up so well because of that, you don’t see much else.
That means you don’t see the decimation that took place in the ‘others’ between early August and late September. And it also means you absolutely hate it when Proctor and Gamble rallies at the expense of the Beloved Semis.
How many times have you heard in the last few weeks that it is not bullish when staples lead? Maybe it isn’t, but as someone who started in this business in 1982, I can tell you that the growth stocks of the day back then were stocks like Coke and Walmart. Oh sure, tech stocks were hot, but there were so few of them.
That is not to say the staples will be the growth stocks again, but growth doesn’t always come from where you expect it. There is a strong recency bias to believe tech is always where it’s at.
In any event, the RSP relative to the S&P has still not made a higher high (blue line). The same way it teased us two years ago (green line). And the others are, as discussed with the IWM chart on Friday, short-term overbought now.
Which brings us back to –what else?—the QQQs! We are finally starting to see some decent selling there. The volume in the QQQs on Friday was 84 million shares, which is the highest since there were consecutive 90+ million-share days in early June.
Yet the put/call ratio chimed in at .90, not exactly a sign folks are loading up with puts. In late July’s tech rout, the put/call ratio skipped right up to 1.05, and in early June it got to .96. Heck, in my weekend Twitter poll, 52.8% of the more than 2000 respondents who voted expect the next 100 points in the S&P to be up.
I am hopeful that when the Investors’ Intelligence readings are reported on Wednesday, we will have seen some of the correction-minded folks jump into the bear camp, but we will have to wait to see that. I am hopeful that the NAAIM folks, who had taken their exposure to the market down to 76 last week, take it down even more this week.
I am hopeful that the put/call ratio sees more puts than calls bought. I am hopeful that the VIX gets jumpy.
I think you can see how much hope is still in this market, though: the late-day rally on Friday proved that to me. And that chart of the Sentiment Cycle matched up with the Nasdaq is in the middle of nowhere, having moved from Subtle warning to Overt warning. I won’t base my market view on one chart comparison, and I would gladly give up on this comparison if I saw what looked like a serious change in sentiment, not just anecdotally but in the data.
