I am a big Billy Joel fan. He was the first concert I ever attended. I grew up in the same town that he did. When he mentions places in his songs, I know them. I went to them, and now I’ve taken my kids to see them too.
The title of today’s note is apropos. Just as Billy had nothing left to say about everybody’s favorite high school sweethearts, Brenda and Eddie, I don’t have much more to say about the current market and what it means for us here.
S&P 500 and NASDAQ 100
First and foremost, the story remains the same. The price trends are bullish. Up and to the right. Above rising 60-week moving averages.
However you want to describe it, it's an uptrend.
Source: Optuma
More Decliners, More New Lows
On the NYSE, there have been more stocks going down than going up since the August 16 peak in the S&P 500.
The five-day moving average of new lows on the NYSE has been trending higher since April and has remained above the key 100 level for nearly a month.
That is not what we typically see beneath the surface of a healthy advance.
Source: Optuma
Bonds
Both investment-grade corporates and Treasuries remain in bearish trends. Both moved lower again last week.
It is difficult to make a bullish case for fixed income until these assets at least stop going down.
Source: Optuma
Dow Jones Transportation and Utility Averages
The Dow Jones Transportation Average managed to tick higher last week, providing a small bright spot within our intermarket framework.
Unfortunately, the Dow Jones Utility Average cannot say the same.
Like the bond market, the Utilities remain guilty until proven innocent.
Source: Optuma
The U.S. Dollar
Long-time followers of Potomac know that we believe cash is a position. And by cash, we mean dollars.
Despite endless fearmongering about the decline of the dollar, it remains the world's reserve currency.
The U.S. Dollar Index made its low for the year on January 30. Since then, it has established a clear pattern of higher highs and higher lows.
Source: Optuma
Final Thoughts
I wish I had more to say, but I don’t.
The S&P 500 and NASDAQ 100 remain the king and queen of the prom despite deepening breadth divergences and a lack of confirmation from key intermarket themes. Every week, we point to the same underlying weaknesses. Every week, the major averages continue to shrug them off. And now we can add a strengthening U.S. dollar to the list of developments worth watching.
At some point, either the internals will improve, or the indices will finally begin to reflect the deterioration beneath the surface.
