More Days Like This and the Put/Call Ratio Will Be Much Lower on Monday
Human nature never seems to change. Neither do the Either/Or Markets.
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Note: I am taking tomorrow (Friday) off. My next column will be Monday morning, August 18.
Human nature never seems to change. Neither do the Either/Or Markets. But first let’s talk about sentiment.
Earlier this week, before folks decided to cover their shorts in the others (or the 493, or the IWM; take your choice), I all of a sudden had noticed we’d gone from strategists talking seasonality to everyone quoting the number of stocks that were below their 50-day moving average lines.
I also noticed that folks who had been bullish just a week prior, when that same number of stocks or something close to it were under their 50-day moving average lines, were now concerned. Then came Tuesday’s big rally in the small caps or the 493. Still I saw cautious chatter. We even saw the put/call ratio at .95 after Tuesday’s rally.
Now, mind you, on Tuesday the big caps lagged but they weren’t red. Then came Wednesday, and like magic there was no more cautious chatter. There was lots of love for the others. Everyone loves the broadening out. In fact I saw only one person scoff at buying small caps and he wasn’t bearish; he just still preferred the big cap stocks.
And what was the put/call ratio on Wednesday? You guessed it: We saw it fall to .74. This is the lowest reading since July 18. By the end of that week IWM had topped at 225 and began a 4% pullback.
This brings me to the Overbought/Oversold Oscillator. It’s still got the math behind it. Notice Nasdaq’s finally lifted up and over the zero line.
The NYSE’s Oscillator has seen a surge. The math starts to change after Friday. By that I mean that by Monday we’ll be back to a short-term overbought reading. I don’t know if we can keep on cranking like this for two more days, but I do know that if we do that, put/call ratio is likely to be much lower.
Then there is the Either/Or part of the market. Is it just group rotation? I’ve called it short covering. Why? Because when stocks like Adobe, which has not been able to get out of its own way, rallies 10 bucks, that’s what it screams to me. The same with Lululemon finally lifting off its lows. I could go on but you see what I’m saying.
The flip side is a stock like GE Aerospace GE, which has been in a solid uptrend. It was down nearly 4% on Wednesday. It came down to this uptrend line it has touched four other times since June. I have it on my watch list to see if it holds or breaks. Everyone else will be watching Beloved NVDA, but I’ll watch GE.
Breaking the uptrend line is not as big of a deal as one might think. To me it’s if it breaks 260 because that is the prior low and the stock hasn’t made a lower low since April.
