So, the short-term overbought reading produced a pullback. Do you realize the S&P 500 has not had consecutive down days so far this month? Not once yet in April. The last back-to-back red days were March 31 and April 1. Since then, we've not been able to string together two down days.
Since the market is overbought, perhaps that will change, but let's explore the statistics from Monday. First, we saw no change in the indicators, but there was a minor shift. We are still short-term overbought, but not yet intermediate-term overbought.
Now let's talk about breadth. Quite frankly, while it was negative on Monday, it wasn't nearly as bad as it has been. Let me explain.
Let's go back to April 13. The S&P lost 28 points on the day, but net breadth on the New York Stock Exchange was negative 1,450. Then came last Wednesday, and the S&P lost nearly 63 points and net breadth was negative 2,000. The truly awful day for breadth last week was Thursday, when the S&P rallied by 16 points and net breadth was negative by 760 issues.
Monday saw the S&P down 51 points and net breadth at negative 1,620. That's better than it was last Wednesday and Thursday. It's even better than it was last Monday. In other words, net breadth, with the S&P down by more than 50 points, could easily have been negative 2,000 or worse, and it wasn't. That's the good news.
The McClellan Summation Index is still rising. But due to those four red breadth days in the last week, the cushion is now negative 1,800. That means it would take a net differential of negative 1,800 advancers minus decliners to halt the rise. Look above and it tells you that's basically a few poor breadth days. And with the market overbought, it's hard to say if we can avoid that.
To me, this means we'll continue to monitor the indicators. The cushion for the Summation Index has thinned out, but has not yet halted the rise.
Another point to make is that the small caps relative to the large caps ticked up on Monday. For now, that ratio is holding at .42. If it breaks, I would not expect breadth to hold up well.
The real story of the day was oil. May oil. June oil. Negative oil prices. Storage. Supply. Demand. Crash. You probably heard it all on Monday. All I will say is that the Daily Sentiment Indicator (DSI) for Crude Oil is now 3. It might not be Tuesday, but I'd bet there is a rally before the week is out. Especially since the stocks didn't get hit very hard. Heck, the energy fund XOP (XOP) was green on the day.