You would think that the market was enjoying violent swings every day the way sentiment has flip flopped lately. I keep trying to understand why the flip flopping of sentiment has become a daily event when the S&P has been in a 15-point trading range for the last 10 days. I can only speculate.
Since the January high we've had two serious swings in the market. The rally off the early February capitulation low. That petered out in late February but it rallied again, likely sucking in many in early March. You might recall the cries that we had seen the "W bottom" and there was no need to fret.
Then there was the late March low that led to the early April rally. I don't think folks were nearly as bulled up at the mid-April high as they were in mid-March but there was a lot of complacency then.
I think this means that every dip we have now sees folks get immediately concerned. As I have said countless times, the market teaches you a pattern over and over again (in this case, that rallies fail) and just when everyone learns the pattern, the market changes the pattern. So I believe that's one reason we saw folks get so bearish/concerned during last Tuesday's decline and again on Friday.
You might recall the total put/call ratio last Tuesday when the market went down was 111%. The Index put/call ratio was 146%. Then Friday came along and the Index put/call ratio jumped to 150%, a level we hadn't seen since late March.
But it's not as though it's only the cautious ones who are jumping the gun. Last Wednesday, the day after we saw the market go down with that high put/call ratio we saw the market rally with an equity put/call ratio of 50%, the lowest we've seen since late January (although late January actually saw it crack under 50% which I consider bearish).
Monday we saw the market rally again. And the Index put/call ratio sunk back under 100%. We last saw it under 100% a week ago (last Monday). I am sure if I look back and study the day to day action of the put/call ratio I would find other periods of time where we flip flopped every other day but I think it is highly unusual to do so. And I believe it was the action of the last few months that has folks so back and forth.
In the meantime breadth was good so the indicators are still rising. The number of stocks making new highs increased for both Nasdaq and the NYSE; they are both now higher than they were in mid March.
I am still waiting for volatility to rise. Thus far I have come up empty on that score.
I will finish off by noting the euro reversed up on Monday and I saw very few even comment on it. Perhaps I'll finally get the euro rally I have been waiting several days for
