NOTE: I received several emails with questions on yesterday's column. Unfortunately some of you sent them and filled in your own email incorrectly so my responses to you kicked back. Please resend your questions so I can respond. Thank you.
Let's begin with an update on the moving average chart from yesterday. It did not tick under -30 yet. But the second part is that I should note a few things I did not note yesterday.
First of all, I did note that typically those lows arrived with a whoosh which is not the case today. A whoosh tends to get my other indicators oversold. That's would be helpful.
Secondly, for those who asked, the same exercise applied to the S&P 500 is around -3. That reading is currently at -2 so it has a long way to go to meet the same level of oversoldness that the Dow is coming up to.
Now let's talk about the current state of the market since Wednesday was yet another grinding, choppy day. The best thing I can report is that this action is working off that overbought reading. Notice the Oscillators are finally tagging the zero line.
A few days ago I noted that the Nasdaq Momentum Indicator was nowhere near oversold. I can now report that it will get a little bit oversold Friday but a better oversold would be midweek next week. You can see on the chart how when I plug in those lower closes for Nasdaq The first tick up is a bit more lethargic vs the second tick up. The first tick up is Friday and the next one is midweek next week. So at least we can finally see an upcoming oversold reading.
Then there is sentiment. The put/call ratio pushed upward to 116% on Wednesday. That's on the high side. We last saw a reading like that on March 2nd. (March 1st saw a reading of 129% so we had back to back extreme readings in early March).
The equity put/call ratio was not extreme (it was 62%) but it hasn't been below 60% since March 13th. That means the 10-day moving average of the equity put/call ratio is now moving up. A few more high readings and it should move up nicely. A high reading in the 10-day moving average means it's 'oversold.'
The problem with the market is the same problem we have had for a few weeks now. We rally and the buying dries up. We sell off and the selling dries up. This creates a whole lot of chop in the market. So let's revisit the chart of the VIX.
Just over a week ago folks were of the mind that the VIX up on a day the S&P was up was not a good thing. At the time I said I thought we could see the VIX rally and sell off again before we saw any real move upward in the VIX. It has since rallied and sold off. I think sometime in the next week it could rally. And that usually means some downside in the market. Downside would help the VIX get jumpy, wouldn't it?