The trend that started two or three weeks ago where our core indicators moved up and ancillary indicators fell continues again this week. Below are updates to some of the things I’m watching without much commentary. You can view this post for an explanation.
I use the ratio between VIX and VXV to signal “all clear” when it falls back below .9 after a choppy of falling market. It couldn’t quite get there this week.
Large caps are still outperforming small caps…rotation to safety starting?
Junk bonds (JNK) are still under performing high quality bonds (LQD)…risk off.
The individual stocks I’ve been watching for clues to a direction are starting to diverge. Market participants are becoming more selective in the momentum names which caused a decline early in the year. Here are some examples.
Twitter (TWTR) is still in a holding pattern and hasn’t decided which way it wants to go.
Baidu (BIDU) is breaking higher.
3D Systems (DDD) looks like it’s breaking down.
Breadth is still holding up and as I’ve pointed out for the last year, the broad market won’t likely enter a correction until breadth breaks down. NYAD is painting a tiny divergence, but nothing significant.
Our core indicators are all still strong. Risk is rising (one of the four components of our market risk indicator is signalling). Ancillary indicators are starting to warn and market participants are getting more selective. We position our portfolios based on core indicators so we’re still 100% long, but watching closely for signs that more dominoes are falling.