There has been a lot of sloppy action in the last two trading days. After all, we've managed to give back Friday's rally immediately after we got it. That means there was no follow-through to the upside after all the hullaballoo.
And to show you just how emotional the market is up here, on Friday folks were giddy enough to load up on calls on ETFs as the put/call ratio for these sunk to 90%. Here we are two days later, and it has soared to 197% as folks are now seemingly loading up on puts.
It's amazing that a 1% move -- up or down -- can evoke such swings in emotion, but it obviously has done just that. Or perhaps it's because the transports haven't made a higher high since November and are on the verge of breaking down. Or perhaps it's because the utes have turned back down.
Or maybe it's because the S&P and the DJIA have failed to make higher highs. Oh, we can throw the SOX into that category as well; failure to make a higher high. And what about the banks? Maybe folks saw the potential head-and-shoulders top in the bank index and they got scared on Tuesday.
The real issue, at least for me, is that the market got overbought. The real issue for me is that folks got a little too giddy on Friday. And then there is the McClellan Summation Index using volume for Nasdaq. Yes, I know I showed it here yesterday, but then we had a sloppy day and it stopped going up. If there is any follow-through selling, it will turn down and it will do so from a lower high.
Let's get back to the transports, since I hear so few noting their poor performance. There has been no higher high since November, but there has also been no lower low since early February. The transports are coming into some support at the uptrend line just below 8900. They have managed to save themselves every single time they are on the verge of breaking down. If this index breaks down, it will surely be a change in the market.
One of the most heavily weighted components of the transports is FedEx (FDX), which is now down 5% from its earnings report. If this stock can save itself yet again, then the transports can save themselves. If FDX breaks down, the trannies will follow. My guess is FDX will attempt to save itself in the next few days. My question is: How well it can save itself; does it bounce well or lethargically?
In sum, we're still overbought and I continue to expect we'll see volatility in the remainder of this month.
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