There Is Still a Level of Complacency Out There

 | Sep 14, 2018 | 6:00 AM EDT
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Each day after the market closes I spend time first hand posting my stock charts and then plugging in my indicators into spreadsheets to see if they have changed at all from the prior day. After I had posted my stock charts I thought the statistics would look better. I was wrong.

The first example is breadth. On Wednesday NYSE breadth was about the same as it was on Thursday. Normally that wouldn't be a problem except that on Wednesday the S&P was up 1 point and on Thursday it was up over 15 points.

Nasdaq, where we saw the best day we've seen since late August, was equally disappointing. Nasdaq gained 60 points and net volume (up minus down volume) which I think does a better job than the advance/decline line for Nasdaq, was +170 million.

Think about this for a minute because Apple (AAPL) was up on the day and traded about 40 million shares which means 40 million of that 170 million was AAPL. That doesn't exactly sound like there was much "spreading the wealth" does it?

Here's another way to put it. On Monday of this week Nasdaq gained 21 points and net volume was +450 million shares. I just can't spin that positively.

I thought for sure the Bank Index would have a rally off that uptrend line, despite how awful it looks and acts. But instead it continued its decline. And curiously I saw very little chatter on it.

Now let me note that the number of stocks making new highs on the NYSE increased by a decent amount. It hasn't yet surpassed the previous readings but at least we saw a nice tick up.

And even if we sell off from here we'll be right back to oversold in a hurry. Heck, as you can see my Oscillators haven't even pushed up with four up days this week.

Early on Thursday we saw the American Association of Individual Investors (AAII) bulls fall by 10 points which signaled a shift in sentiment for that particular survey. The Investors Intelligence Bulls only fell by 3 points this week (now 57% down from 60% last week). However it was the equity put/call ratio that I am shocked at.

How do we go from folks all beared up early this week (with a total put/call ratio at 115%) to an equity put/call ratio of 50% on Thursday? A reading under 50% is what I consider bearish. But I decided to check to see what 50% has brought us this year. The chart of S&P shows those times.

The green arrows are the readings spot on 50%. The red arrows are under 50%. The two readings in early and mid-January did not in fact matter to the market, although the Russell topped out in mid-January so we might argue that the mid January reading did matter.

The red arrows are sub 50% readings and in January it was one more week before it mattered and when it mattered, it mattered quite a bit. Inn May and June both mattered.

Clearly there is still a level of complacency out there.

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