Does Greece really matter, or was it just an excuse for some profit-taking? I suspect it was a little bit of both.
I also find it ironic that Barron's had "Dow 15,000" on its cover this weekend -- while, inside the publication, the columns of both Alan Ableson and Mike Santoli discussed the somewhat exuberant sentiment of late.
As I noted last week, it is my view that the Investors Intelligence readings show more complacency than exuberance. However, the Market Vane bullish percentage now stands at 66%. The last time this survey reached such levels was February 2011, and that reading was the highest one since before the 2008 downturn, so we know this is high. While this is not a perfect indicator in terms of exact timing, I would note this: When the four-week moving average is used for this survey, we do get a good sense of the intermediate term.
This indicator, in fact, can sometimes be a week or two late, since we are waiting for it to turn downward. However, its path does tend to move with the S&P 500, as you can see on the chart. Four weeks ago the reading was 60%, so a reading under that level this week would be the first downtick.
On a very short-term basis, let me note that the put-call ratio climbed above 100% for the first time since Jan. 24. In fact, Jan. 23 and Jan. 24 were the only days this year that saw above-100% readings on the put-call. The S&P rallied the very next day, but more generally the index had made no progress for about another week.
Away from sentiment, the McClellan Summation Index has stopped climbing for the first time since the year began. This should not shock anyone. It is a sign not only of how overbought the market has been lately, but of how hard it is for a market to continue upward without some backing and filling or correcting. Since this indicator has made a higher high, we would expect it to back off and "rally" again.
Meanwhile, the Dow Jones Transportation Index has broken the steep uptrend line I've been harping about, but it managed to bounce off the shorter-term and flatter line of support at 5200 (marked A on the chart). I don't believe it's bullish that the transports have lagged so much in the past month -- but, until 5200 is broken, this is just a correction.
I have not discussed the channel in the S&P in a few days, so let me report that the index is still in the upward channel that has been in place since the year began. Ever since the employment-data release just over a week ago, the S&P has not breached the 1335 area. It might be hard to tell from the chart shown here, but that lower line will come in around the 1335 zone this week. I suspect a break of that level would garner some attention.
More by Helene Meisler