Markets are at new highs, but the euphoria is missing

Trader Talk

The markets are at new highs, but it doesn’t feel that way.

Large earnings beats from companies as diverse at Lockheed Martin, United Technologies, PulteGroup and Whirlpool are propelling the S&P 500 to a new high. In addition to earnings well above expectations, we see China bottoming, Europe showing at least some signs of stability and an accommodating Fed.

Doesn’t get much better than that! So what’s next?

We have earnings reports from banks (fair) and industrials (better than expected) and a smattering of consumer names like Kimberly Clark and Procter & Gamble (also better than expected). To keep the momentum going, we need to hear from technology, energy and especially health care, which has suddenly become the problem child for the markets.

Good news after the close: Texas Instruments, one of the world’s largest semiconductor companies, reported earnings above expectations and provided second-quarter guidance that was roughly in-line with expectations.

This is all good news, but if you think Wall Street is celebrating, try calling around on a trading desk: You won’t hear any champagne corks popping.

“It’s not just today, it’s been dead for weeks,” one sell-side trader told me. “It’s the opposite of euphoria.”

This is an age-old Wall Street complaint: Stock traders do not view a new high as truly valid unless there is some serious action — some serious volume, some serious volatility, some kind of, well, serious hoopla.

And that is what is missing from the rally.


  1. The S&P may be sitting at an historic high, but there are only 13 stocks in the index at new highs. The market is being pushed up by a small group of super-performers. So, traders believe the rally needs to broaden out.
  2. No one is scrambling to buy stocks. Volume has been abysmal since the end of March.
  3. No one is panicking either: The CBOE Volatility Index is sitting near the lowest levels of the year. No one seems particularly worried that the market may drop suddenly.

The lack of euphoria or its opposite — the lack of worry — is one reason many traders are enthusiastic about the near-term. It means many are still sitting on the sidelines and they may now be dragged into the markets after seeing the new high headlines.

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