Who Charted? Ep. 71 | The Hits Keep Coming (May 11, 2026)

Ajouté : 2026-05-12

[00:00:10][music] >> Good morning. Happy Monday. Welcome back to another episode of Who Charted. I am Dan Russo, Co-CIO here at Potomac. Hope everybody had a great weekend. And to all the moms out there, I hope you had a great Mother's Day. So, another week, more of the same. The note this week is titled The Hits Keep Coming because, as we can see, the S&P 500 and the NASDAQ 100 both solidly above their 60-week moving averages, and both put in their sixth consecutive week. Six. 1 2 3 4 5 6 consecutive weeks of gains. More importantly, to me anyway, both indices closed at the top of end of their range on Friday. What does that mean? That means investors were comfortable going home with risk over the weekend. Now, do not confuse the top of the charts with resistance.

[00:01:02]All right?

[00:01:03]The trends here are healthy. Both indices are solidly above their moving averages. Both indices are strong. These are textbook uptrends, right? So, what's the next step? We look for confirmation.

[00:01:17]We love breadth, right? Is the trend healthy? In a healthy uptrend, you expect to see more stocks going up than going down. Well, the 1-year stochastic of the NYSE advance-decline line sits at about 89-90%.

[00:01:30]Right? 1-year stochastic is simply where are we now relative to the range over the past year. 100 is top of the range, zero is bottom of the range. So, we're very near the top of the range. So, you have the NASDAQ trading at record levels, the S&P 500 trading at record levels, the NYSE [snorts] advance-decline line trading near record levels.

[00:01:54]What's left?

[00:01:56]Remember, we've seen this story before.

[00:01:58]Okay? We saw it earlier before the market sold off in the spring because the generals were not in line.

[00:02:07]Okay? Now, we have the Mag 7 trading at all-time highs, right? Go back and look at all the rants. Listen to all the rants that I was making at the time about how the S&P 500 is a cap-weighted index and even though the other 493 were doing well, even though the other 493 were strong, if the Mag 7 are not in gear, it's hard for the market to go up because there's so much market cap there. Well, guess what?

[00:02:36]Mag 7 all-time highs with the major indices. Essentially, the way that I think about this is the generals are charging and the army is going with them.

[00:02:51]For all intents and purposes, that is bullish. Okay? Now, let's look at our intermarket themes. You all know that we pay a lot of attention to the transports. Transports here never even tested its rising 27-week moving average. Remember, we talked about the whole Avis Budget story, right? And while that sold off, it had a huge influence for a short period of time on the transports. Now, the transports actually tried to sell off last week.

[00:03:18]Look at this long tail here. This long tail here tells you that the transports tried to sell off, but closed back up near the top end of the range for the week. That tells you again that investors were comfortable with risk. Now, this is Dow Theory, right?

[00:03:35]Using the transports is a 125-126-year-old concept known as Dow Theory. I have made the case over and over and over again that there are times where we want to pay attention to other themes as well. One of which is the semiconductors, right?

[00:03:54]Ad nauseam. Check out our YouTube channel. We had a good conversation about semiconductors that was published last week.

[00:04:01]Ad nauseam, I've talked about the semiconductors and how important they are to the market. And as you can see here, 1 2 3 4 5 6 in a row again, similar to the S&P, similar to the NASDAQ, exactly the same actually.

[00:04:14]And closing at the top end of its weekly range, well above a rising 27-week moving average. So, what do we have now?

[00:04:22]Strong trend, healthy trend, trend confirmed by two key intermarket themes. For our work, the transports being more important than the semiconductors, but for those of you who know me, you know I pay attention to the semiconductors.

[00:04:36]Now, what I would like to see, I'd like to see the VIX trending lower a little more expeditiously, right? A VIX at 17 is fine. All right, let's be clear. A VIX at 17 is fine. Maybe I'm being a little cranky and I want bit more. I want more. You know, maybe I want VIX in the low teens.

[00:04:58]Um but a VIX at 17 is fine, but it is slightly higher than I would think. Now, if we look, 17.19 on the VIX, and if we divide that by 16, you get roughly 1.07%.

[00:05:15]1.07% is roughly, this is a ballpark way to figure out what the market, what investors are pricing in for day-to-day moves over the next month of trading.

[00:05:26]So, investors think that the S&P 500 will move about 1.7% per day over the next month. 1% moves are kind of volatile for a market that's trending the way the S&P and the NASDAQ are trending with health from breadth, as well as confirmation from intermarket themes. Again, maybe I'm looking for a little too much perfection, but I would like to see it. That number does seem a little bit high for me. Nothing to get worked out up about, but something we want to pay attention to. I get it, right? There's conflict in the Middle East. There's a lot of things for investors to worry about. Markets climb a wall of worry, but I would love to see this VIX trend lower. And finally, I am going to leave you with if I wanted to start the bear pitch, which I'm not doing, but if I wanted to start the bear pitch, I would look at new highs, as we always do, and I would look at new lows.

[00:06:21]Now, there is a concept that was conceived back in the mid-1970s, 1976 to be exact, by Norman Fosback in a book called Stock Market Logic.

[00:06:32]He gave us this indicator called the high-low logic indicator. Basically, what the high-low logic indicator is trying to identify at a high level is are there a lot more new highs or a lot more new lows, or some combination of the two.

[00:06:50]In a healthy bull market, you would expect to see a lot of new highs and very few new lows.

[00:06:58]Likewise, in a {quote} {unquote} healthy bear market, you would expect to see a lot of new lows and very few new highs.

[00:07:06]A market where you are seeing a fair amount of new highs and a fair amount of new lows is one that's potentially confused. Okay? You don't expect to see a lot of new lows in a massively healthy bull market. Now, this could obviously change on a dime, so it's something we want to pay attention to. It's not something we want to use in isolation, but I am paying attention to it. So, if I wanted to make a bear pitch, I would probably highlight the fact that we're starting to see an uptick in new lows, even though the S&P 500 and the NASDAQ 100 are at all-time highs.

[00:07:46]Right? FOS back tells us that a market with a lot of new highs and a lot of new lows is a confused market. So, let's pay attention to that. For now, the trend is strong, the trend is healthy, the trend is confirmed by intermarket themes. So, it's hard to get too bearish up. We want to see the VIX continue to come in, as in drift lower than 17, and we'd like to see new lows start to fall off cliff fairly quickly here. Until the data changes though, there's not much else to say. I hope everybody has a great week.

[00:08:17]Thank you, as always, for taking time to [music] listen to what we have to say and reading what we have to write. We will be back next Monday.