You have to admit that rally on Friday had everything. And it really was pathetic.
It had everything because it had the big gap open followed a big mid-day fade that took us red, or close to it followed by a rally back to the high at the end of the day. If you like roller coasters then Friday was for you. If you like the FANG stocks then Friday was for you.
If you like strong breadth in your rallies, Friday was not for you since net breadth was +450 issues. Let me remind you the S&P was up nearly 40 bucks. If you prefer the small caps at least join the party just a little bit then Friday was not for you since the Russell spent almost the entire day in the red.
If you like it when banks open strong and stay that way then Friday was not for you since they opened strong and gave it all back. The chart of the Bank Index is one only a mother could love. Speaking of, no my mother has not yet called to ask about the market.
I have not been a fan of the Banks for a while but I thought for sure we'd see a rally toward 104 on Friday and the Bank Index couldn't even make it to 103 before turning red. I still think they are oversold enough to rally but so far they don't much care what I think.
Speaking of being oversold, we are very much still oversold. My own Oscillator is based on the 10-day moving average of the net of the advance/decline line. When we look back at the numbers we are dropping from 10 days ago we look for a string of red numbers to consider us oversold. As you can see from the table below there is a lot of red. Even the 30-day moving average has a lot of red for this week. The 30-day is a more intermediate term Oscillator.
I will grant you that the first three days of the week show very moderate red numbers. Keep in mind to get more oversold we have to replace a red number with a larger red number so if you look to the end of the week you can see some pretty big numbers.
As I've discussed, the Nasdaq Momentum Indicator has this window to get oversold between last Thursday and this Tuesday. So did the rally on Friday change that? See for yourself. If I walk Nasdaq down 200 points this week, taking it back to where it was mid-day Thursday the Momentum Indicator goes up. That's what happens when it's oversold. So the window is still open. Wide.
Nasdaq's Hi-Lo Indicator is now at 15%. Under 15% and it is oversold.
The 10-day moving average of the put/call ratio is still rising. I expect it will rise for another few days, hopefully getting to an extreme level.
I do not expect any sort of V bottom. There has been a great deal of damage done to the charts. But the market is still oversold so even if we back off from Friday's pathetic rally we should rally again.