Remember how bullish folks turned one week ago, Thursday, when the market opened down and closed higher? Remember how bearish folks turned on Monday when the market opened up and dropped? Then we had a repeat on Tuesday, with the market selling into the bell with a three-peat on Wednesday with another decline into the bell.
As of midday on Thursday I saw an awful lot of folks who had been all bulled up until this week talking trading range and chop. It was as if all of a sudden I had so much company. And, of course, I hated it.
My sense is that the close on Thursday has emboldened the bulls again and taken the wind out of the bears' sails. I saw one gentleman on Twitter note that he was buying United Continental (UAL) after hours because the bad news was priced in, similar to the way the bad news was priced into the retailers. I don't know about you, but I think there is a big difference between thinking bad news is priced in on the SPDR S&P Retail (XRT) when it is down more than 10% from its highs and seeing UAL $1 off its highs and thinking the bad news is priced in. That is not a comment on the XRT or UAL, but rather on the sentiment. A month ago, I don't think he would have been so brave with the S&P at 1740.
I even have a statistic that shows us we've developed a bit of froth in the markets. The ISEE Equity call/put ratio was a whopping 284%. Readings of more than 200% do not happen often, let alone ones that are near 300%. The last time we had a reading over 275% was December 2012. That is circled on the chart.
Not every high reading has had such a perfect correlation to a short-term correction. But my point is that this was clearly some giddiness we have not seen before.
I also want to point out that in the past week we've seen Nasdaq tack on 29 points twice and then this Thursday's 27 points. We did this exercise two days ago, but we'll do it again. Last Thursday's 29 points saw net volume at +1.2 billion shares. Monday's addition of 29 points saw net volume at +830 million shares. Thursday's 27-point gain saw net volume at +500 million shares. For now it doesn't matter, but this narrowing is a change in character for Nasdaq.
In addition to that narrowing in volume (breadth) we find new highs on Nasdaq were 260 in mid January. We saw them reach to 228 earlier this week. Thursday's reading of 138 is downright pathetic.
But again, none of this matters right now. Perhaps it never will. But these are not the kind of statistics that warm my heart and make me feel good about the market here. I have thought we'd chop for a few weeks with a push up in early March followed by another move back down later in March. These statistics make me wonder if we can make it until mid-March.