Correlations Go Back To Normal Without A Breadth Thrust

Jason Goepfert
2018-02-20

This is an abridged version of our Daily Report.

Correlations go back to normal

As stocks sold off, correlations between sectors rose as they usually do and are back at a normal level. That has reversed a period when correlations were almost at the lowest level in history, eclipsed only by the bubble in 2000.

When correlations rose from a low level, it led to medium-term positive returns, but some long-term trouble.

No thrust

During the 6-day rally off last week’s panic, there hasn’t been a buying thrust. The largest Up Volume Ratio was 83%, well below the usual threshold of 90% that would suggest eager buying.

It didn’t matter – future returns were about equal whether there was a thrust or not.

Quick change

Almost no S&P 500 stocks were above their 10-day averages last week, but now more than 80% are.

The latest Commitments of Traders report was released, covering positions through Tuesday

“Smart money” hedgers added aggressively to longs in 30-year Treasury futures, now holding more than 5% of the open interest.

For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.