The sentiment shift was strong on Tuesday. It was even stronger on Wednesday. I expect we're heading to an extreme.
To review, two weeks ago the equity put/call ratio sunk under 60% for far too many days, meaning folks were loading up on calls, betting on a higher stock market. On Tuesday, the ratio moved up to 86%, which indicated a change in sentiment, from even last Thursday when we saw this indicator at 55%. But while 86% was a change, it was not extreme. Wednesday changed that when the ratio surged to 99%. During Brexit, it reached 101%.
This has moved the 10-day moving average of this indicator, which had been sitting there snoozing for the better part of two months, up and out. In the coming days, this 10-day moving average will drop all those sub-60% readings, so I expect it to really push higher, but as you can see a push higher comes as we head into lows, not highs.

Then there is the Daily Sentiment Index (DSI), which measures a bullish percentage. Recall that in early October I noted that Nasdaq's indicators, which had not rolled over as the NYSE's had, were in fact rolling over. At that time, the DSI for Nasdaq was over 50%. As of today, it stands at 13%. And if the action after the close in the beloved names continues on Thursday, I think we can all agree it is likely this indicator goes to single digits.
Once the DSI goes to single digits, it's extreme. Recall that several weeks ago when I noted that VanEck Vectors Gold Miners ETF (GDX) , for being long gold stocks, was at support at $23 and the DSI for gold was 5%. On Wednesday, GDX filled that gap from when it collapsed to $23. Extreme readings matter.
Then there is the oversold factor. I cannot narrow it down to a specific day, but the market will be back to an oversold condition sometime between Thursday and Tuesday. I know it's a wide range, but that's what we get. You can see, however, how far down the oscillator is now, after sitting in such a tight range most of the summer.

The McClellan Summation Indexes continue lower, but I also like to calculate what it will take to turn them from the current down to up. The NYSE currently needs +3,800 advancers minus decliners. Once it gets over +4,000, we're oversold. Nasdaq's Summation Index is better using volume.
Currently this requires a net differential of +2.4 billion shares (up minus down volume). Considering Nasdaq traded 2.1 billion shares on Wednesday and that was the highest reading since September's expiration, you can see that when this gets up into this zone, it too is getting oversold since it would require several awesome up days in the market to halt that slide.
It's not quite Brexit extreme, nor is it as extreme as January and February, but if the after-hours action continues through Thursday, I think this will push up over +3 billion shares, which will be very close to extreme.

I would note there are no positive divergences as the number of stocks making new lows continues to increase. We have not seen an extreme reading in the TRIN yet either. But we are heading toward an oversold condition and we are seeing bearishness build. I'm on the lookout now.
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