Stuck in Purgatory and All We Need to Get Out Is a Good Whoosh
6800 has become an anchor. If we can break below it, will that change sentiment?
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
For such a quiet day in the market, I feel as if there is much to cover today. And I want to begin with sentiment.
I have not seen any of the slower-moving, more intermediate-term sentiment indicators move much yet but as I read research reports and listen to the folks on Financial TV, I realize there is an oh so subtle change in their tone over recent weeks. We came into the year with folks gung-ho about stocks. They loved the financials, but they haven’t been very helpful to the portfolio this year, have they? They still liked tech, too. But forget the groups, remember all those calls for the S&P to go to 7700-8000? Yet here we are, two months into the year, and we’re stuck where we began.
Then software went blew up. And the Mag 7 stopped going up, and some even came down. The banks got sold on earnings, and the groups no one liked like energy and staples soared. You can understand why the sentiment feels as if it is not nearly as bullish as it was.
Now we see it in the options ratios. The ISE Equity call/put ratio’s 10 day moving average has fallen to just under where it was in November. It currently stands around 1.8. The April low last year was 1.55 while the high as we entered the year was around 2.7. The change is that calls are no longer being scooped up. Yet the S&P is still at 6800.
The ten-day moving average of the CBOE’s put/call ratio is at .93. This is the same spot it was at in November, when the S&P tagged 6500. It is still far from the massive reading we had at 1.08 last April but with the S&P nearly five percent higher than it was in November, the options are similar. That’s how we know the sentiment is shifting.
Yet why do I insist I want to break 6800 on the S&P? Because I feel as if it is a well-watched level and saving it is doing us no good. If we break it we can see if the selling really will dry up. One way to test that notion is using the number of new lows on Nasdaq. The peak reading (so far) on February 6th was 569. Tuesday’s minor breach of that level had 285. So you see, it is possible that we could break it like we mean it, get those options ratios extreme and maybe have fewer new lows.
After all, the Nasdaq Overbought/Oversold Oscillator is already down in oversold territory, so maybe a whoosh gives us a higher low in the Oscillator.
The one thing I don’t want to see is another save because I think a save is unlikely to change the current market, and the current market is –at least for this minute—stuck in purgatory.
Note: I had a nice chat about the market today with Christian Fromhertz. You can watch the video on YouTube here:
https://www.youtube.com/live/DGwAPJNpz08?si=8qD3PlJDqHSeFRdr
