Last week was one of the quietest weeks of the year. Volume on both major exchanges, NYSE and the NASDAQ, was on the light side. It seems that individual investors are suffering from, as Mike Williams from Genesis would say, “altitude sickness.” The higher the market goes, the dizzier they get.
We have had a solid earnings season that is coming to a close with unemployment numbers coming in at decades-low readings, a stock market making new highs almost weekly and record cash-on-hand. Yesterday’s reading on bullish sentiment from AAII shows it fell 5.3%, the largest weekly decline since March 9. It also extends the trend for a sub-50 bullish reading for a record 123 weeks.
Yesterday was a prime example, as Wall Street recorded another day of new highs. Oil had a nice little spike, taking black gold close to the $50.00 mark. Upgrades in Johnson & Johnson (JNJ) and Cisco (CSCO) kept the rally going. A $1.2 billion buy-in balance on the final minutes of trading made sure the Dow (^DJI, DIA) would close in the green, with advancers beating decliners by a margin of three to one. If you were expecting bells and whistles and confetti falling from the rafters of the great Trading Hall at 11 Wall Street, you would have been sadly disappointed. With the lack of any real volume and the lackluster enthusiasm among traders and clients, unless you were looking at the tape, you would have never guessed we were hitting another record.
So why the malaise? Some economists blame the political environment in Washington and the constant accusations among the White House, Democrats and the press. Others point to events out of the Korean Peninsula. Still others, including myself, think that investors may have gone too far, too fast and are taking every high as if it’s the last one. The one major crack in this rally since the election—which no one seems to talk about, apart from the “FANG ” group and a few other big names—is the set of individual less-sexy stocks, which are trading basically flat and trailing the S&P 500 (^GSPC, SPY) by the biggest margin in two years.
I am looking for the S&P to break above 2400 and crude to stay in the $50.00 to $55.00 range before we get those bells and whistles. However, with Memorial Day a few weeks away (the official start of summer), I don’t expect to see volume pick up, and complacency, as measured by the VIX, will likely stay in the low range.