We have a curious situation in the market. It didn't feel like there was much selling on Tuesday and yet breadth was quite weak (relative to the indexes) and the number of stocks making new lows doubled from Friday.
Regarding breadth, last Thursday with the S&P down nearly 13 points net breadth on the NYSE was -830 issues. That seemed pretty good to me relative to the decline in the S&P. But Tuesday's decline of not quite five points in the S&P gave us net breadth of -900 issues which seems "too much" (i.e. weak) relative to the decline in the S&P.
If we step back over the last week the S&P is literally flat as a pancake and net breadth is -400. I will call that in line so it's not bullish nor is it bearish. Yet when we look at the McClellan Summation Index which shows us what the majority of stocks are doing we see a second lower high (vs June and July) and it's rolling over. This is with the S&P hovering near the high. It concerns me.
The bad news is that this is a lower high and it's rolled over. The good news is that it now requires a net differential of +1,100 advancers minus decliners to turn this back up. Once we get to +2,000 we're moderately oversold. Once we get to +4,000 we're extremely oversold. So we're heading to an oversold condition without much selling so far.
My own Oscillator is coming down in a hurry. It's too soon to say when it will be oversold but you can see that one more down day (for breadth) and it will be back under the zero line once again.
I was surprised we did not see the put/call ratio rise much on Tuesday. It stayed at 85% which is mostly neutral. The Investors Intelligence Bulls ticked up a smidge to 60% on the nose. Not a penny more. Anything over 60% to me is where we think there are too many bulls.
In the meantime the yield on the 30-year bond continues to bounce off this uptrend line. Recall I had though 3.1% would be a resting spot (resistance) when we last checked in on this. Then I thought we'd see it make a try for 3.2%. I was wrong in that the resting spot turned into a correction right back to the low to test the line. 3.1% will be resistance once again but I continue to eye that 3.2% area as the target.
I will throw in the towel on the bonds if we break that uptrend line. It is rising which means by mid-September it will be closer to 3% than the 2.95% it has been at.