The market had some real weird underpinnings this past week.
The Nasdaq 100 and the $SPX closed up, but the $NDX outperformance was almost a complete disconnect from the underlying market of stocks. A stellar jump of 2.3% was the best major index in the world.
But the dichotomy of what is going on under the surface really is amazing. The McClellan Oscillator is positive above zero and negative below. The top panel ($NASI) adds up the daily readings on the $NAMO. The middle panel plummeted in strength going deeply negative and almost to the worst readings level all in a week. But the select group of the Nasdaq 100 rose. Very interesting.
The easiest way to describe it is the top 6 stocks make up 50% of the index and they all had a good week, lifting the index while the broad market of stocks pulled back. On the zoom panels, you can see how well they did.
This is important to be aware of. Semi conductors were up this week, and the software industry moved higher as well, so there were some other gainers. But the plummeting of those around suggests caution ahead. The idea of moving to safety in the large mega-caps seems to be playing out over and over on each pull back. It was certainly apparent this week. With most of them having large buybacks, it is hard to argue. But rarely does it work out well, when the world coalesces in 6 large stocks. So far, so good. With a plummeting of breadth, be careful out there.
Greg Schnell, CMT, MFTA