About the only thing that has really changed in the market in the last two trading days is that folks have turned more cautious.
Recall a week or so ago I highlighted the chart of the Citibank Panic/Euphoria Model with it firmly in Euphoria land. Then last week Wednesday saw the Investors Intelligence Bulls push their way to 60%. But in the last two trading days the put/call ratio has been 117% and 115% respectively which tells us that there is finally some caution pushing into the market. The 10-day moving average of this indicator continues to move higher.
A high reading on the 10-day moving average that peaks and rolls over (not there yet) would indicate that market players are getting too bearish.
We did see the market rally on Monday and the put/call ratio remained high (overall that goes on the positive side of the ledger because you don't want folks to get all bulled up at the first green day). Despite the rally the Overbought/Oversold Oscillator went down. Yes, down.
Recall that my Oscillator is based on the 10-day moving average of the net of the advance/decline line and for it to be considered oversold we need to be looking at a long string of red numbers to be dropped. We will get to that point sometime between Friday this week and Tuesday next week. Again, that doesn't mean we can't have up days before then (we are clearly into oversold territory based on other indicators) but the better oversold rallies tend to come when there is a long string of red numbers to be dropped going forward.
I was asked to update the chart of the small-caps relative to the large-caps and as you can see there is very little to report! We had a minor move up in the ratio in early August and since then it's been a big chop. I am not one to harp on seasonality but we often see the Russell is one of the weaker indexes in the fall. I am still of the mind that this ratio needs to come down more than it has.
Sticking with ratios, I know everyone loves the financials. I hear it all the time when asked what they recommend we hear: financials and technology. Yet take a look at the Bank Index relative to the S&P. It has been in a downtrend pretty much all year. At least since the February low it has.
The last 2 years we have seen banks relative to the S&P bottom sometime in the third quarter. I thought that spike low in July could have been it, but it has been very disappointing. The last time we didn't see the banks do better than the S&P in the fourth quarter was 2015.
Think about it. There are fewer regulations, they are buying back stock, and I hear all the time that higher interest rates are supposed to help them (I remember when lower rates were supposed to help the banks so I get confused on these fundamental issues!). Watch the banks.