Let's begin with the Oscillator. It has finally moved! Both the NYSE and Nasdaq finally pushed up and over the zero line, thus they are no longer oversold. As for being overbought, that's a horse of a different color.
The NYSE will be overbought on Monday. It is difficult to say exactly how overbought because despite the fact that breadth has been positive for seven of the last 10 trading days the actual positive breadth readings have been relatively unimpressive. For example, there are two days when net breadth didn't even make it to +100. But since we are dropping a string of positive readings, that makes the market overbought next week.
Nasdaq is not nearly as clear since it has only had five positive breadth days in the last 10. And the Momentum Indicator, having just turned oversold last Monday will not show us much for several more days.
But back to breadth. I cannot recall another time in the last two years that the S&P has made a new high and breadth has been quite far from a new high. But that is the case.
And despite the seven of 10 days of positive breadth, the McClellan Summation Index is still heading down. I also cannot recall this happening. In 2015 we saw the Summation fall but the S&P was more sideways to choppy, not up as it has been. I will delve into the further and report back but the fact that the S&P has been rallying for nearly 10 days and the Summation Index has not turned up is certainly a divergence. It still requires one more positive breadth day to turn up.
Then there are the number of stocks making new highs. Two days ago I discussed the new lows and I do want to repeat what I wrote. The new low list is littered with bond funds. This is true. We did not exclude them on the way up when bonds were rocking upward, so why exclude them now? But even if you opt to do so, understand that interest rates matter to the market so if rates are rising enough to cause all those bond funds to litter the new low list, you should care because eventually it does matter.
Now, the new highs have been contracting during this entire move up since August. I'm even willing to forgive that they are nowhere near the January peak, but the S&P is at a new high with fewer than 100 stocks making new highs. Please someone, tell me how that speaks of broad participation.
Finally, the put/call ratio for ETFs went to 69% on Thursday. It has been under 100% a few other times this year but the last time it was 70% or under was January, a few days before the high. So sentiment is a bit elevated at this point.
I don't want to sound like everything is bearish, because it really isn't. There are just a lot of non-confirmations as we head into an overbought market. The good news is that the 10-day moving average of new lows for Nasdaq did finally curl back over which is supportive of the market.