If I show you this unmarked chart, with no prices and no name on it I suspect most would recognize it. But rather than try and figure out what it is I'd like you to study the chart and consider what you see.
I will tell you what I see. I see a chart that has moved back and forth in the same range for the last two months. I can also point to the fact that in mid-to-late November (starting around the 19th) we saw a market close on its lows, or give up the gains daily.
At the end of that period we were very oversold. At the end of that period sentiment was so sour it would have been difficult to find a bull. And then we rallied. Now we have a market that closes on its lows, or gives up its gains daily as well. We have a market that is heading toward an oversold condition too.
What we don't have though, is sentiment in the same place. For example, in late November the Investors Intelligence Bulls were in the mid-30s. Now they reside in the mid-40s. Oh sure next week they might easily be back to the mid-30s, but for now they are not.
And remember those constant readings where the put/call ratio for ETFs was under 100%? In late November the 30-day moving average of this indicator was way up near the top of the page. I wasn't that concerned over the low readings because the moving average line was still so high. Now the low readings have ceased for now at least) but the moving average is back at the bottom of the page.
But it hasn't changed my mind. I still think we'll be oversold enough to have a rally. If we plunge first then maybe sentiment would shift dramatically, although not enough to change the moving averages of the various put/call ratios. It should change the Daily Sentiment Index (DSI) and it should change the shorter-term sentiment readings.
Away from that, there was a minor change in the trading on Wednesday. Bonds finally sold off some. This has been my expectation since the 10 Year tagged 2.90%, but the bonds didn't care about my expectations as they fell to 2.85%. I'm not quite ready to say they can rally all the way back to 3.05% because I think that's too far and too much to expect now. But this general area is where they should start to find some support.
I want to end by noting that I was right when I was asked about where to buy GLD about a month ago (I said $113-$113.50) but I was wrong when I said I wasn't sure it could go very far. It has now managed to get back to where it was nearly six months ago. As long as it can stay over $116-$117 I suppose it should work its way higher.
