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.
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.
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.
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The post titled Correlations Go Back To Normal Without A Breadth Thrust was originally published as on SentimenTrader.com on 2018-02-20.
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