The headlines all said the market was down on trade war fears. Yet, the semiconductors saw the selling dry up. So did the emerging markets. Heck, the iShares FTSE/Xinhua China 25 Index (FXI) -- an exchange-traded fund to be long on China -- was green all day. What's even more interesting, two of the poster children for the trade war, Caterpillar (CAT) and Deere and Co. (DE) -- stocks we used to call the animals -- saw no selling either.
Now, I grant you they are all down a lot already, so at some point the selling should abate. On Tuesday folks sold their hidey holes like foods and drugs and staples, and heck, even their precious utilities. On Wednesday, they came for the software stocks, albeit those stocks are up so much that one day down hardly registers on the chart. But, sell they did.
The truth is, folks tend to sell their winners last. They sell winners, because they are finally scared enough to fear the downturn coming in them. And we did see sentiment get overly bearish again. The total put/call ratio ended the day at 141%, which is quite high.
The peak reading for this metric was on Dec. 20 when it chimed in at 182%. On Dec. 21 it was 143% and on Dec. 24, the day of the low, it was 132%. This reading of 141% is the highest since that period of time.
The put/call ratio for exchange-traded funds was extreme as well. It was 262%. There was a reading just over 200%, at 211%, on May 10. The very next trading day on May 13 saw the market down hard, but in the ensuing three days we rallied nearly 100 handles on the S&P 500.
Prior to that, we have to go back to late December for such high readings. Dec. 18 saw a reading of 211% (so similar to the May 10 reading). Dec. 21 was an eye popping 326%, and Dec. 24, the day of the low was 255%. So, I think we can agree, this is getting into extreme territory.
Then we have the Daily Sentiment Index (DSI). For the S&P it was 90 in mid-April. Today it stands at 24. Once the reading gets under 20, it's in extreme territory. Under 10, and it's really gone too far. It was 4 at the December low. Nasdaq is currently at 21. It too was over 90 in April. Once again, the shift in sentiment is dramatic.
My shorter-term Overbought/Oversold Oscillator will be back to oversold on Monday. As for the intermediate-term indicators, the only one that has moved much is the Volume Indicator, which is now at 46%. Once in the low 40s, it's oversold.
I will end by noting that the bonds might have peaked in the near term on Wednesday. Even if Wednesday wasn't the day, the DSI once again was 91. As a reminder, the DSI was over 90 for stocks in mid April. No, that wasn't the exact peak, but it was a good time to stop buying stocks. I still think bonds come down in the weeks ahead.