So what's leading the market now? Apple (AAPL) was green, and the market was red all day, so I guess we have to take that stock off the list. What about the dollar? Nope -- we can't blame the buck, either, as it was weak as well. You think banks are leaders? Then why didn't they pull the market up Wednesday?
I can tell you this: My inbox was filled with emails from folks wanting to know if it was time to buy, rather than sell. So, for those of you who want the reasons for a rally in the short term, here they are.
The Arms Index (TRIN) on the Nasdaq has been above 1 for five trading days in a row, which is pretty uncommon. Six days is even more uncommon, and we have only seen this three or four times in the last six years, with one instance ahead of the rally just after this past Labor Day. Each six-day stretch led to a rally. While a five-day stretch doesn't yield the same result, it does tell you how much selling has taken place on the Nasdaq in the last week.
Almost every major index is at a support level. Nasdaq has the 3040-to-3050 area, while the S&P 500 is sitting right at that lower channel line. (You thought we had forgotten about that channel, eh?) The 50-day moving average lines of the Dow and the Russell 2000 are pennies below current levels, as well.
So those are the reasons for a short-term rally. Please notice what wasn't on the list. There is no mention of a jumpy CBOE Volatility Index (VIX) -- because it has not jumped. We haven't seen incredibly high put-call ratios -- two days in a row at 100%, what we saw, is not incredibly high. It is simply a shift from the 26-day stretch when the readings were coming in below 100%. Neither are we seeing a contracting number of stocks at new lows -- instead, we have expanding new lows. In fact, the number of stocks making new lows on the NYSE is at the same level now as it was when the S&P was at 1365.
In addition, the McClellan Summation Index needs "only" a net differential of +2700 -- in measuring advancers minus decliners on the NYSE -- in order to turn itself upward. In order to get to +4000, which would signal that the market is grossly oversold, we would need to see approximately one more day of breadth readings similar to those on Tuesday. That would probably trigger jumpiness in the VIX and get folks scared, likely with very few calls for bottom-fishing.
My favorite anecdotal conversation came on television Wednesday. I almost fell off my chair when I saw a discussion of the "high number of folks looking for a correction" in the weekly Investors Intelligence poll. Do these folks look at charts? I ask you to look at the chart of the correction-minded folks, which is now at 28.8%. Where was this conversation when stocks were at their June low and this number was hovering up near 40%? Back then, I am certain they were too busy listing all the reasons the market should be down even further.
I can easily see a rally in the short term. Heck, I thought we could see one Wednesday, and I was wrong about that. But on an intermediate-term basis, stocks are not oversold, and I'm not seeing any intermediate-term indicators of such. I continue to believe we should sell rallies.