Gloom, Yes. Panic? That Could Be Around the Corner.

Worried trader

March Madness begins this week. Some might say it began weeks ago in the stock market. I would ask you a question, though: do you know that the S&P is still over 6600 (let alone 6500) and the Nasdaq is still over 22,000?

What’s more, over 40% of stocks in the S&P are down 20% or more from their highs. According to many, that would mean we are, or close to half of the stocks in the S&P are already in a bear market. Is it any wonder folks are gloomy?

This week’s Investors Intelligence bulls dropped again. They now number 42%, which is about 20 points lower than they were in early February. It is also a smidge lower than the 44% we saw in late November.

You might recall last week, the bears surged from that incredibly low reading. They were up again this week and now clock in at 24%. That is the highest reading since last summer, but nowhere near the peak reading of 36% in April last year.

The bull/bear ratio is now 1.77. In early February, it was 4.22. It is now under 2.0. It is rare that a reading under 2.0 doesn’t get to under 1.0 before a substantial rally (i.e. one worth buying for) takes hold. On this 20-year chart, you can see that once we get under 2.0, we tend to get to the point there are more bears than bulls (thus under 1.0). There were two times we didn’t get to sub-1.0. Once we got to just over 1.0 was in the spring of 2007. We had a great rally, but as we all know, that was not ‘the low’ for that cycle.

The other time was in the fall of 2024, when we had a low in October and rallied until early December/January before sliding into the Tariff Tantrum.

The put/call ratio clocked in for a third straight day at over 1.0, so folks are no longer just buying puts; they are doing so with gusto. I would not call it panicky, but it’s become very persistent.

The Daily Sentiment Index (DSI) is at 33 for the S&P and 39 for Nasdaq, so they are still in neutral territory. Perhaps if 6500 and/or 22000 can break, we’ll get those moving into the 20s.

Is the market oversold? It is. On a short-term basis. On an intermediate-term basis, that is not the case. The Volume Indicator remains at 49% (oversold is at least 47%). The Hi-Lo Indicator for the NYSE is at .41 and Nasdaq is at .27 so Nasdaq is getting closer to an oversold condition (under 20%).

The number of stocks making new lows on Nasdaq continues to be subdued. At 210 new lows, we are still more than half the stocks making new lows we saw in early February.

The NYSE still has fewer new lows, but it’s getting to the point where my confidence that the new lows can remain fewer is low.

So, the gloom is permeating, but so far, there has been no panic as best I can tell. And now we sit at the 200-day moving average line.