After All the Selling, We Have to Be Oversold, Right? Well...
Let's check under the hood for that 'elusive' reading and see how sentiment is holding up. Plus, close looks at Palantir, Meta and Netflix.
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The Market
For nearly six months the majority of stocks have been going sideways, at best, or down, at worst. Yet sentiment remained complacent. Then in late October it got giddy. However, in late October the majority of stocks were still going down.
But now, after three weeks of selling and the beloved semis (SOX) down just over 10%, you would think sentiment had changed. It has gone from giddy to oh gosh, I’ll call it a bit less than complacent.
We saw it Wednesday when the Investors Intelligence bull/bear ratio slipped down to 3 from 4.25 a few weeks ago. Thursday’s AAII readings actually surprised the heck out of me because the bulls ticked up marginally while the bears ticked down marginally. This is pretty surprising when you consider the selling we’ve seen this week. In any event, with the AAII bulls at 32.6% and the bears at 43.6%, I’d call them cautious, not bearish. Recall the bears were at 60% in April. And they were there for weeks, not just one week.
The folks over at NAAIM did not change their exposure one iota. Again, surprising after the week we had, but perhaps they were all counting on Nvidia (NVDA) saving the market. Let’s see if next week that exposure is able to fall under 80.
The put/call ratio has been over 1.0 twice in the last week, which means the 10-day moving average of the ratio is now at 0.93. I take that as folks are not panicking to buy puts but they are gradually doing so (for now). The chart is below.
The number of stocks making new lows on the NYSE did not expand beyond the reading from Tuesday (169) as Thursday’s new lows chimed in at 159. Over on the Nasdaq though, the new lows jumped to 467, which is the most since April when we had well over one thousand new lows.
There was some decent selling in the QQQs because we saw volume in them go to 116 million shares, the most since April (good news). Too bad down volume did not get to 90% on the NYSE today. It was 82%. 90% means we have some panic.
Once again, instinctively I want to tell you we are oversold because we’ve been down so much, but the math is still a bit elusive. It gets better next week. However, we did see the McClellan Summation Index for the Nasdaq (using volume), which I have been harping about, noting how weak it has been, get to the point where it now needs a net differential of +1.3 billion shares (up minus down volume) just to halt the rise. That makes this indicator oversold for the first time since early August.
Eventually we’ll see panic coupled with an oversold condition. We’ll get there; we always do.
I will end by noting that the DSI on Bitcoin is now 13. So it is in the yellow flag zone now. Single digits, especially if we get single digits and Bitcoin is near $75,000 (measured target) it would be a buy.
New Ideas
I will do some follow-ups I was asked about.
Palantir (PLTR) broke $170 and has some support right here ($155) and better around $150 as next support.
Western Digital (WDC) broke $150 and has a next support/target around $130-ish.
Today’s Indicator
The put/call ratio is discussed above.
Q&A/Reader’s Feedback
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Meta (META) is down 15% since it gapped down on earnings. It measures as a next target right here in this area. One problem is that it filled that gap, rallied for a day and then went plop. There is another gap down at $560. It is oversold enough to rally but I thought that at $600 and it was a two-day rally. I will give it credit for not making a lower low Thursday.
Danaher (DHR) has seen no selling in November, which is why this market is so difficult: either/or. It’s a base, though in this market things have gone down rather easily even if a base. I’d say as long as that $210-215 area holds this has a chance to fill that gap above around $245. Break that support area and I’d be out.
Netflix (NFLX) announced a share buyback and even that couldn’t rally the stock enough to fill the gap. There is a minor measured target at $105 but a better one near $100.
