Eighty stocks were higher this morning and the S&P was down 40 handles.
Let that sit for a second, because it’s the most dangerous setup on the board and it always gets dismissed by the mainstream.
The advance decline line was stellar. Financials were higher and so was energy. Utilities up a percent, staples up a percent, healthcare up almost two, Apple higher, Microsoft higher, Google flat.
And the index kept sliding.
One sector was doing all of it. The semiconductors got taken apart, Micron off 7%, Intel off 7%, and that single group dragged the whole thing red while three quarters of the market went up.
That’s dangerous, and most people read it as reassuring.
You’re correlating to the upside with the market going down. Everything is balanced on the edge, and something like that can snap and flip over in a second. When one group is doing all the damage, the question is whether the damage stays put or starts pulling in everything else.
So I spent the session watching the financials. If this thing was going to get ugly, financials would have to get involved, and volatility would scream bloody murder.
Neither happened. So it held.
And stop looking at the stupid VIX while you’re doing this. The VIX is the dumbest number on the screen. Watch the volatility futures instead, because they’ll tell you whether anybody is paying up for protection, and this morning they were up 45 cents.
Nobody gives two beeps to the downside right now.
Do this tomorrow morning. Pull up the advance decline against the index, and if most stocks are green while the index is red, go find the one group doing the damage and watch whether it stays contained.
Thursday at 2 Eastern I’ll open my platform and go hunting in whatever market Thursday hands us. Nothing scripted, and most names get a no out of me in about four seconds.
I’ll also give away $1,000 to somebody in the room.
To your success,
Don Kaufman
