There's mounting evidence that suggests the post-Election Day stock market rally is due for a pullback. Below are three reasons from data reported on Friday and cited by Hedgeye CEO Keith McCullough in today's Early Look.
1. Stock Market Volume
As equity markets hit all-time highs, total market stock market volume (the sum total of investor buying and selling) didn’t accelerate. On Friday, stock market volume was down -2% versus the 1-month average. Volume accelerates when investor conviction is high. Lower volume on the up move equals less conviction.
Stock market volatility, as measured by the VIX, has crashed -27.5% since the election. Volatility rises as investors grow more fearful and falls as investor confidence grows. In fact, the last 60-days of trading have been the least volatile (rolling 60-day) time period in the Dow and Nasdaq since 2007.
That may be changing.
The VIX appears to be trending higher. "The VIX signaled its 1st higher-low (within my risk range) in 3 months," writes Hedgeye CEO Keith McCullough.
3. Consumer CONFIDENCE
Consumer sentiment got a huge boost after Trump's Election Day win. But the honeymoon period may be waning. The University of Michigan U.S. consumer confidence slowed to 95.5 in February versus twelve year highs of 98.5 last month.