What is there to say that I haven't said already?
If you were not privy to the stats that I provided last week by the wonderful sentiment analyst Jason Goepfert of Sentimentrader.com here you go:
Starting around the 2nd week in January, stocks have had a consistent tendency to weaken. Or at least not show much strength. Especially technology.
I don't want to hammer on this too much. Seasonality is a tertiary indicator at best, and can easily be overwhelmed by fundamental developments, technical breakouts and changes in sentiment.
The performance of various sectors since the day honoring Martin Luther King, Jr. became an exchange holiday in 1998. The performance of QQQ was positive only 1 out of 11 years into the end of the month.
He goes onto to provide a wonderful chart that shows sector performance after the MLK holiday and the Nasdaq 100 only has a 9%, yes 9% chance of closing higher than its price level before the holiday.
Furthermore, 24 of the indicators he follows are reading bearish, not a single one is bullish. Some of the indicators include Rydex Bull/Bear RSI Spread, Put/Call Ratio - OEX Open Interest Ratio, every Put/Call RAtio including Equity Only, Total of All Options, Equity Moving Averages, Liquidity Premium QQQ and SPY, AAII Sentiment Survey and the list goes on and on. So, I think you get the picture.
1/3 gap here we come?
Okay, so if the post-MLK meltdown is to occur we would need to see a move down below $58.18 or 2.7% in the Nasdaq 100 (NASDAQ:QQQ) over the next six days.
We are still in the weakest period of January, but even that is coming to a close over the next few days.
Courtesy of Sentimentrader.com
And there are a few catalysts that could certainly help to bring this market lower over the next few days.
- Apple (NASDAQ:AAPL) earnings due out tomorrow after close (1/24)
- For the first time ever, the Fed on Wednesday will release forecasts for the path of interest rates.
- GDP release Friday
It just feels as though the market is teetering. I get the sense that the bears are just waiting for the bulls to pile on in drives before we see what will be a fairly decent decline that closes the 1/3 gap. One thing is certain, we are in the most short-term overbought state that I have seen in years, so something has to give. Grinds higher typically lead to collapses lower. The problem is knowing when the grind ends. I think the time is near.
(Click to enlarge)