It seems to me that the action of our watchlists — the IBD50 and Stocktwits50 — may indicate that the basic psychology of the market may have shifted some. I’m not talking about the major move in the market that we saw on Monday or Wednesday:
Unless you had anticipated the large step-ups, especially on Wednesday, the action occurred outside trading hours and was next to impossible to trade. Last week’s volume didn’t impress me. Friday couldn’t hold its rally. I will be delighted to be wrong, and could even argue for some more upside between now and year end. However, I am not convinced we are out of the woods of headline-driven market volatility.
However, unless this last week was just a fluke we may have seen something of a return to normality in the behavior of the Stocktwits50 and the IBD50. The numbers for the Fri-Fri week were:
- S&P 500 +7.39%; NASDAQ Comp +7.59%
- Stocktwits45 +7.74% 98%W; Stocktwits45 Top-10 +8.73% 100%W
- IBD50 +7.37% 98%W; IBD50 Top-10 +6.68% 100%W
Best in the Stocktwits was ALLT (Allot Comm) +19.52%, in the IBD, ULTA +14.85%.
However, this is the first week since August 6th, bar that of October 8th, where we have seen a great proportion of winners in both the main lists and the top-10s. In fact, the percentage of winners has been pretty paltry. Since August, both in average and compound the S&P and the NASDAQ, have materially outperformed both the IBD and the ST watchlists. The top-10s from the watchlists have also had a hard time beating their main lists too. At risk of major understatement, the market has been, well, topsy turvy.
This week, the ST50 top-10 beat out the main list, the IBD top-10 was not left behind by much (the main IBD list has beaten its top-10 list two-thirds of the time since August 6th, which is not normal). The ST50 beat the market averages and the IBD came close.
PLEASE NOTE: I am NOT saying that all will be plain sailing from here on, or that it’s straight up from here. But what I do hope for is somewhat more normal behavior from the market components. While volatility is hard to deal with, a manic market is just not something to work with. Let us hope this week is pointing to more normal behavior.
On the broader front, using our Vanguard ETFs as proxies (energy, small caps and emerging markets):
