Market Analysis

Deception

Markets are doing their thing and are walking toward the shining light that they perceive the upcoming Fed meeting to be. $SPX new highs this week, $NDX new highs this week. Looks fantastic.

In spirit of documenting reality let’s keep looking under the hood.

In today’s peek: New highs vs new lows in the Nasdaq. While $NDX powers on to new highs you’d think there would be a visible expansion in new highs versus new lows.

There isn’t. None, flat as a pancake:

I find the chart fascinating as it shows a persistent weakening over the past 2 years. Whereas the rallies leading to new highs in 2017 and 2018 came on expanding new highs versus new lows the rallies into new highs last Fall showed weakening and signaled something amiss. And something was amiss big time as Q4 massacred stocks.

Then came the big jawboning Fed flipping on its back waggling its tail wanting to play fetch with markets rally of 2019. New highs in April and again new highs now in July. Expansion in new highs versus new lows? Not evident, weak all year compared to 2018 and indeed this week’s new highs show the weakest readings yet in this recent cycle.

What’s it mean? Deception basically. The rally is not as strong as the headline index figures on $NDX make it out to be.

Take a look at the weekly longer term chart and the message is clear:

Strong rallies expand on the new highs versus new low front. Weakening rallies show shrinking expansion. Note 2013 was very strong. then new highs in 2014/2015 increasingly became weaker culminating in the August 2015 early 2016 drubbings.

And, as we saw in the summer of 2018, weaker expansion, then the drubbing.

Now we see again the same weakening process. Even weaker than before.Doesn’t mean we roll over today, but this rally construct is deceptively weaker than it appears and that perhaps makes this data set supportive of the eventual VIXplosion argument.


For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.

Advertisements

Categories: Market Analysis

6 replies »

  1. Another very wise documentation of reality which also concurs fully with John Hussman’s evaluation of deteriorating market internals which signal a shift in investor psychology toward risk aversion. Once this takes hold, no amount of central bank intervention halts the decline. (Hussman: They’re running toward the fire)

  2. You could saw the fight for control last night where they nearly lost the control over the dip. Did you notice the massive movements before closing of the NYSE? From watching it you can feel this extreme tension in the markets and I’m thinking this will soon unload in a massive carnage.

  3. Speaking of the Vixplosion, I wonder what the VIX would have been today if “Astroid 2019 OK” had hit Earth on Thursday, the ultimate black swan. It was detected only a couple of hours before it passed Earth, traveling at 54,000 MPH, around 500 feet wide, missing Earth by 45,000 miles (1/5th the distance from the Earth to the moon). NASA still has not been allocated the $250 million needed for the Astroid detection space telecope (delayed from 2020 to 2034 as of today). Oh well, I just seen Beyond Meat hit $14.14 billion evaluation today on $40 million in quarterly sales…so all is good on planet Earth!

    We are such a silly species…LOL At least the billionaires will be able to escape in their luxury rocket ships! The rest of us, not so much so party on!

  4. Beginning to think the “don’t fight the Fed “ applies no matter how idiotic the Central Banks are..amazing !!!!

  5. Sven Henrich is a refreshing breeze in a sea of market commentators, who if all were tossed off the top of the Empire State Building, would say the same thing all the way down – “So far so good!”

Comment:

This site uses Akismet to reduce spam. Learn how your comment data is processed.