Last week folks were still grumbling about the market. Heck, they bought enough puts on Friday to push the equity put/call ratio to 70%, something they couldn't even do the entire June downdraft.
Then Monday comes along and relief sets in that there was nothing untoward that took place on the weekend. How do I know there was relief? Well there was buying, yes despite the light volume, there was enough buying to push the number of stocks making new highs on the NYSE to the highest since June.
At just shy of 150 new highs with the S&P knocking on the door of new highs it's not impressive on its own. But when you consider we haven't seen this many new highs in almost three months, it's a major improvement.
If the S&P manages to push up over the recent highs and the number of stocks making new highs fails to get over 200 that will be a problem once again but comparing just a week ago to now, there has been improvement.
As we know breadth has been good and in the last week has pushed up to higher highs. There are some metrics out there, such as the number of stocks over certain moving average lines, that lag considerably but the raw data of the advance/decline line has made another new high.
The interesting part is that the last time we had net breadth at quadruple digits for four of the last five trading days was early April. Why is that time of interest? Because after just over two weeks of rallying the market came back down, pretty much all the way back down to the same area it started from. Since that early May low it hasn't done that again. Yet it started with the some terrific breadth readings.
I bring this up because Monday's put/call ratio for ETFs was 79%. We have had plenty of readings under 100% and sometimes they matter, sometimes they don't, often they matter for one day. So I looked at times this reading was under 85%. It turns out that happened only twice in 2018. Those are the red arrows on the chart and you can see it was definitely not bullish within a matter of days.
But then there was late 2017 when twice we saw four consecutive days with sub 85% readings. Once centered around Thanksgiving and the other centered the week before December expiration. So sure, maybe it was due to year end positioning but I don't like to rationalize an indicator: in 2017 the low readings were not bearish.
The S&P has been green for three straight days. It should surprise no one if Tuesday is a down day.
