Back from Vacation and Wondering if This Short Week Will Change Sentiment
Sentiment seems to have gotten even more bullish over the last week. But will the upcoming holiday-shortened week give investors pause?
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Am I surprised the market rallied last week? No. Am I surprised it rallied so much last week? Yes. But I am more surprised that sentiment did not seem to get much more bullish.
For example, it wasn’t until Friday that the total put/call ratio finally fell to .75, and quite frankly, I’m surprised it isn’t in the 60s by now. Heck, the equity put/call ratio hasn’t had a reading in the 40s in six weeks. This surprises me.
It surprised me that the NAAIM exposure had zipped right up to 94 a week ago, but last week, then the market rallied nearly every single day, fell to 81.
The AAII bulls and bears don’t surprise me because those folks remain mostly bearish yet fully invested. The Investors Intelligence folks have kept it mostly steady with more bulls than bears, but very little change. We’ll see if that changes this week.
The Daily Sentiment Indicator (DSI) was 77 for the S&P and 76 for Nasdaq when I departed on vacation two weeks ago. I figured last week’s rally would surely have seen those move into the 85 area but no, here too I am surprised as they sit at 82 for the S&P and 80 for Nasdaq.
The VIX’s DSI did get to 20 on Thursday but Friday it went back to 22. This does not surprised me but tells me that if the market rallies this coming week these DSI readings could finally get into that danger zone. Yet as I have noted, the lack of outright bullishness last week surprises me.
It also surprises me that while bonds have lifted and rates have backed off, mostly bonds are flat. It surprises me that despite all this rallying—heck even the DJIA joined the fun last week to the tune of nearly 2000 points—Apple is still 200. What has happened to this former fan favorite? It just goes to show you eventually all stocks become ordinary.
It surprises me that NYSE breadth is at a new high but the McClellan Summation Index is flat. It is pointing back upward and needs a net differential of -900 advancers minus decliners on the NYSE to halt the rise. Where is the big cushion? Especially with the breadth at new highs.
And with breadth at new highs it surprises me that the number of stocks making new highs on the NYSE is 125. The last time the S&P was up here in the fourth quarter, there were over 450 stocks making new highs. On paper breadth making new highs is bullish but clearly the individual stocks are not following along.
We’ll see if the end of the quarter and the beginning of the new quarter along with the holiday shortened week can change the sentiment or any of these indicators.
