Helen Meisler thinks rally has further to go before it flops.
Remembering the Early May Rally
By Helene Meisler
Special to TheStreet.com
06/18/2002 09:15 AM EDT
If I hear one more person credit Monday's rally to McDonald's (MCD:NYSE - news -
commentary - research - analysis) better-than-expected news, I think I'll scream. Maybe
the fact that McDonald's isn't going to disappoint us is good news, but it wasn't the stock
of the day! It was up less than a buck in a big up market.
Whatever the reason for Monday's rally, it happened. And what did Monday's rally bring
us? Another rally where breadth, as measured by both the advance/decline line and the
upside/downside volume, put in a good showing. And another rally where volume was
light on both exchanges, although it felt significantly lighter on the New York Stock
Exchange.
Maybe it's because we've seen so many 1.5 billion-share days on the Nasdaq that I get
the sense that 1.5 billion is average, whereas 1.2 billion on the NYSE feels less
adequate. The past two weeks have seen volume soar on the NYSE, with many days in
the 1.5 billion-share range or better, thus putting the 1.2 billion-share days in the lower
end of the range lately.
The absolute figures show Nasdaq's average volume for the past 30 days is 1.7 billion
shares, and the NYSE's average volume for the past 30 days is 1.3 billion shares.
Therefore, they were both only marginally lower than their 30-day average. However, if
we take just the past two weeks, then the Nasdaq's average volume is still 1.7 billion
shares, while the NYSE moves higher to 1.5 billion. This is why NYSE volume felt like
more of a problem than the Nasdaq's to me.
But enough scoffing at the rally. While I do believe it will eventually fail, I can also see a
similarity in some of the indicators that mirrors the early May rally. And that early May
rally, although it did come in fits and starts, lasted a few weeks and saw the Nasdaq run
about 200 points and the S&P 500 run just over 50.
One of those indicators is one I mentioned Monday: The McClellan Summation Index
(using volume) for the Nasdaq did turn. I said Monday that it would take a marginal up
day to halt this indicator's slide, and we had more than a marginal reading in the
up/down volume yesterday. So, the indicator turned. As usual, you'll need a magnifying
glass to see the little fishhook turn, but it is there. This indicator doesn't tell us the
magnitude of the move, only the direction. You can see in early May it also moved higher
and how that corresponded to the 200-point Nasdaq rally. |
