Investors Aren't Fearful, Just Gloomy

Worried trader

We already know I prefer it when the market gives us a whoosh. I like to see panic. I like to see a day where we close on the lows, and we get 90% of the volume on the downside. I also like it when the VIX gets jumpy.

But I also like it when the Investors’ Intelligence bulls are low (currently 48%). I also like it when the bears are at least in the 30s. I like it when the NAAIM exposure number is low (at least under 50 and preferably more than that).

I also like it when the ten-day moving average of the put/call ratio soars. I like it even more when there is a one-day reading that rocks up over 1. I like it when the ISE reading falls to double digits. I like it when the DSI pushes down to teenage readings.

And I love it when all of this happens while the market is getting short and intermediate-term oversold. That is the perfect setup.

What we have now is a market that is very short-term oversold. Even after Monday’s rally, we remain short-term oversold.

What we have now is not panic but gloom. My gosh, it was hard to find anyone jumping for joy that we had finally rallied on Monday. Yet it was the best breadth day we’ve seen in six weeks. Still, no joy.

I can tell there was no joy because we gapped up and sat there. I can tell there was no joy because the ISE Equity call/put ratio remained subdued at under 2.0. I can tell there was no joy because the put/call ratio was .99 which was actually higher than Friday.

I know everyone is focused on the price of oil. But oil hasn’t made a new high in a week. I have not commented on WTI itself since the war began, and sure, maybe we ought to ignore that spike up to 120, but I don’t like to rationalize, and so I won’t.

I have joked that everything I know about the oil market I learned from watching Landman, but I have heard others say that under 90 and folks will feel better about the price of oil. Notice that the uptrend line (it is steep, though) comes in right around 90, and it comes in late this week.

I feel pretty strongly that the energy stocks are not buys up here since OIH has been underperforming XLE for almost a month now.

Anyway, I say watch the financials. No one fusses over them anymore. Maybe because it’s been at least a day or two since we’ve seen a private credit fund headline. They, too, are oversold. If they can’t get any traction on an oversold rally, that should be more concerning for the market (not the economy, the economy should be concerned about oil).