Let's start with something anecdotal. Like the fact that two weeks ago when the S&P first hit 2,800 the enthusiasm for the market was high although not off the charts. There were many who thought we'd blow through 2,800 and keep on going since earnings were going to be so good.
But then we chopped. And we all know that chopping around is a sure way for traders to make mistakes. Chopping means what's up today is down tomorrow and what's down today is up tomorrow so there tends to be very little follow through without a lot of overall change, thus as traders we get chopped to death. And getting chopped up has a way of changing sentiment.
As we were able to hold our own in the 2,800 area we saw sentiment embrace the rally more. Understand that since July 11th we have not seen a put/call ratio over 100%; that was the first change. It's not exactly fallen too low but last week we saw the ETF put/call ratio at 99% which means folks were leaning bullish for the first time.
But back to my anecdotal observation: Monday morning many seemed to pull in their horns. I don't know exactly what happened to make them more sanguine about the market in the short term, but I saw it all around me. My guess is two weeks of chopping and lethargic breadth has changed their views.
What we know is that we are a little bit oversold. Let me explain. A good oversold reading is when we look back and see that the 10-day moving average of the net of the advance/decline line is dropping a long string of big red numbers. A little bit oversold is when we look back and there are some red numbers to drop, nothing terribly large. As you can see the Oscillator has pushed down under the zero line. I noted earlier that I thought we could be a little bit oversold midweek and that is still the case.

Then there were the bonds on Monday. That was quite a move in them. Don't you wonder why nothing else seemed to care though? I mean the Utes, which I had been a huge fan of since February (am no longer fond of them, having seen them hit my target and now I have too much company) should have gotten clocked and they didn't. REITs should have been down at least something noticeable and they weren't.
Yesterday I noted I thought yields would rise and we looked at the yield on the 30 year. I noted the 3.10% level at the time. It was so far away I didn't think I needed to be that specific. Yet here we are. The blue line at 3.125% is resistance and I would expect a breather to be taken there. If for some reason they blow through there without a breather, I sense the market might not like such a quick move but for now I think this area finds some light resistance.