'Tis the Season Not to Bank on Seasonality
When the market doesn't do what it's expected to, pay attention. Let's see what's up with November, with sentiment and where I'd be a buyer of Bitcoin.
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When a stock doesn’t do what is expected of it, we should all take notice. No, I am not talking about Nvidia (NVDA) even though all eyes are on it. I am talking about the stock market.
As long-time readers know, I don’t pay much attention to seasonality because I have seen it work and not work. If my indicators line up and the seasonals are on the same side, great. As we entered the month of November the cry was that we were entering one of the best times seasonally for stocks.
You might recall I even inquired at the time: If seasonality did not work in July, August, September and October, why should we expect it to work in November? Stocks were supposed to go up this month and here we are three weeks in and they have not. In fact, this is the worst decline for the major indexes since April.
Most indexes are down approximately 5% (most stocks a lot more than that). We haven’t had a 5% correction since April and now that we have, folks seem to think everyone should be a big bad grizzly bear. It’s going to take time to convince folks because for the last six months they have been trained to buy every single dip and it has worked.
Are they bearish though? I noted the Investors Intelligence bull/bear ratio yesterday has come off the boil it was at a month ago. AAII surprised me by seeing a minor uptick in bulls and downtick in bears. With bulls at 32% and bears at 43%, I’d say they are not that bearish, just cautious.
However, while we have not had a put/call ratio that is eye-popping like one of those readings over 1.10, we have had enough elevated readings to get the 10-day moving average to 0.93, which is now the highest since April. So folks have been buying puts, just not doing so in panic mode.
The NAAIM folks, though, have not reduced their exposure. Not yet at least.
The overall volume in the stock market hasn’t been anything to write home about, but on Thursday the volume in the (QQQ) s chimed in at 116 million shares. That’s a lot since it is the most since April. Call that a little bit of panic.
Yet we have not seen a lopsided day in down volume. Thursday saw 82% of the volume on the downside. For me 90% represents panic.
My own Overbought/Oversold Oscillator looks oversold (as it has for weeks now) but the math behind it says we’re not quite there yet. However, I have recently written a lot about the McClellan Summation Index for the Nasdaq (using volume) and the big divergence with it going down and the Nasdaq going up. That indicator now needs a net differential of +1.3 billion shares (up minus down volume) to halt the rise, which makes it oversold. It can go higher but it’s finally stepped a toe into oversold territory.
I will close this missive with a comment on Bitcoin because the Daily Sentiment Index (DSI) is now at 13. That’s the yellow zone. If it gets to single digits at the same time (BTC) gets anywhere near that measured target of $75,000 I’d be a buyer. I cannot believe I said that!
