A Poor Excuse for a Pullback

 | Jan 29, 2013 | 6:00 AM EST
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I guess Monday's session is what passes for a down day in 2013. That said, I did notice some minor sequestration chatter -- something I discussed here last week. Even the defense stocks finally took notice and headed south, even though folks somehow ignored this prospect last week.

With that in mind, I want to address a question I received several times on Monday: What could possibly take the market down? Let's look at that a different way. Think about when the market is in the depths of a decline -- when you think the market should rally and it doesn't, and all the news is horrible. Don't you find yourself asking, "What could possibly rally this market?" Then, boom, out of nowhere, some news arrives and the market rallies.

So if you are asking yourself that nowadays, you will understand why the bullish percentage in the Investors Intelligence readings is kissing 53%. You will understand why that CNN Fear and Greed Index -- which I highlighted Monday -- was at 94% over the weekend. You will understand, moreover, why the moving averages of the put-call ratios are this low and turning upward. Just have a look at the 10-day moving average below.

Put-Call Ratio -- 10-Day Moving Average

Now, just in case you are firmly planted in the bull camp and want to see this chart as bullish, glance over at the rally in early 2012. Here, you can see that it took three higher lows in the indicator before these kinds of readings mattered. Of course, we are now beginning to see those higher lows.

The other refrain I hear so often is about how everyone wants to buy the dip. We have seen this countless times in the markets, because human nature doesn't change, and everyone is dying to pick up stocks on a step back within an uptrend. But, as a result, we have two potential outcomes: Either the dip never comes, or the dip arrives and quite suddenly folks have myriad reasons as to why they have no interest in buying it.

Finally, I was asked to update my view on oil. As you might recall, I began thinking oil should rally starting in October or November. It ended up taking quite some time to get going, and the price rose with very little fanfare this time around -- a contrast to the usual zip and pizzazz that's typical of this commodity. On the chart below, that base actually measures up into the area of $102 to $105 per barrel, but for now I think it will be quite tough to chew through $100.


As long as oil stays above the $94.50-to-$95 area, it should make its way up toward $99 to $100. Should we see any break of that uptrend line, I will rethink my view. Of course, what I would love to see would be a spurt up into resistance that gets everyone excited and chattering. But when oil rises so gradually, the move tends to go unnoticed.


Overbought/Oversold Oscillator -- NYSE

Overbought/Oversold Oscillator -- Nasdaq

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