So much for the selling drying up. Well, it did in some places and not in others.
For example, as I'm sure you saw many stocks that had been holding up gave way to new lows on Tuesday, such as oil stocks. The number of stocks making new lows on the NYSE expanded beyond the October reading. That is not good news.
Yet over on Nasdaq where the selling seemed to be the most intense the last few days, the number of stocks making new lows contracted again. That is good news.
Breadth on the NYSE was the worst it has been in a month. That means the Cumulative advance/decline line is now back to where it was when the S&P was last down here. So instead of outperforming as it had been it is back to performing in line.
And the poor breadth has turned the McClellan Summation Index lower. It now needs a net differential of +2,000 advancers minus decliners to turn back up.
My own Oscillator gets oversold on Friday. It's iffy right now if it will make a higher low. If it does make a higher low that would be a positive divergence for momentum.
Nasdaq's Momentum Indicator which uses prices instead of breadth is now oversold. Even if Nasdaq goes down on Wednesday the indicator goes up which is what makes it oversold.
Another interesting statistic for Nasdaq is the cumulative volume has not made a lower low.
But it's sentiment that is back to super bearish. The Investors Intelligence Bulls are now at 39.8%. This is the lowest reading since May of 2016. In February of that year we saw Bulls down to 25% but in May they slipped just under 40% as they have now. Also in May of 2016 the Bears plus Corrections were at 60%, which is what we see now. I honestly cannot recall why folks were so bearish in May of 2016 because surely the price action doesn't look terribly dire but here's the chart of the S&P so you can see. As a reminder, that June whoosh was the Brexit vote.
Then there is the Daily Sentiment Index (DSI) which for both Nasdaq and the S&P went under 10 to 8 on Tuesday. Typically a single digit reading means folks have gotten far too bearish and we should rally. Think of it like this: with readings at 8, it means 92% are bearish.
Sure you can understand the bearishness but 8 is extreme. I am not even a fan of the semis but the SOX closed green on Tuesday and I don't think I saw anyone praise it. It has been about a year since the SOX has shown any sort of strength relative to the rest of Nasdaq. It's worth keeping an eye on. Especially if we get an oversold rally because sentiment is too bearish.