During Thursday's trading I was reminded of the old question: Are you more afraid of missing the rally or more afraid of missing the decline? If you were bearish on Tuesday and bullish on Thursday then I think you need to sit back and consider the indicators.
Nasdaq is overbought. I'd like to tell you that the last two trading days have changed that but it hasn't. The NYSE is not nearly as clear because the NYSE has seen breadth alternating positive and negative for nearly two weeks.
I can also report to you that the number of stocks making new lows on the NYSE increased again on Thursday which means there was no positive divergence.
On the sentiment front I must also report that the Investors Intelligence Bulls jumped from 38% to 46% in the last week. The American Association of Individual Investors' weekly survey saw bears go from 47% two weeks ago to 30% this week. I will grant you that these two surveys likely don't include the action on Tuesday and Thursday morning but no matter how you look at it, sentiment shifted with last week's rally.
The 10-day moving average of the put/call ratio's chart is also problematic. With the exception of November/December last year each time this indicator has turned upward it has not been good for stocks. It is possible that this is just a small blip before it heads down again but it is something that needs to be watched.
So those are the bearish indicators. But now I want to discuss the McClellan Summation Index. For the entire month of September, while the S&P enjoyed a rally, or at least an upside bias, the Summation Index went down. I noted it constantly on the bearish side of the ledger.
Since late October the Summation Index has been heading up. The November decline saw the indicator with a minor blip down and this week's decline hasn't even had an affect on the indicator to the downside. None. In fact, it made a higher high this week.
Even if you look at the Nasdaq McClellan Summation Index using Volume you can see the same pattern, only much more dramatic on the upside. In this case it peaked in early August and was trending down throughout September and October. But since late October, it has surged upward. If the Summation Index tells us what the majority of stocks are doing, then this says, they are either making bottoms or heading upward.
Therefore I don't know how you can be definitive that the market is awful here. Nor is it terrific. It is mixed. It will turn bearish if the Summation Indexes rollover but with gusto but so far, given the chance, they haven't done so.