Back in the 1970s and '80s, there was a sportscaster on the East Coast named Warner Wolf, who used to use the catchphrase, "Let's go to the videotape!"
Today, I am going to borrow a form of that phrase and say, "Let's go to the charts!"
The chart that everyone has their eyes on is that of the S&P 500 with its 50-day-moving average. You can see that it looms just overhead. You can also see that the last two rallies -- since we fell in August -- have been stopped there.
Something to pay attention to with this chart is that 50 trading days ago was June 10. I've put a blue arrow there on the chart. We are essentially trading in that range now. If we cannot get up and over that moving average in the next week, then we start to replace higher numbers with lower ones and that makes the moving average roll over. It's just the way the math works.
But what about the indicator charts? Breadth has been so good the last few days that the McClellan Summation Index stopped going down. That is the first time it has done so since mid-July. It needs another day of good or positive breadth to get it to turn up. But this is the first time since the indexes rolled over that we can even say it stopped going down.
Now, take a look and see that the cumulative advance/decline line (breadth) made a higher high than Aug. 13, but the S&P 500 has not done so -- yet.
My own Oscillator, which is the reason I said we were oversold last week, has shot up. The hard part is determining when it will be back to overbought. Much will depend on how the market trades in the next few days. A few more days of positive breadth and we'll be back to overbought in about a week. If we get negative breadth readings, the timing for an overbought reading gets very murky.
We looked at the 10-day moving average of stocks making new lows on Monday, so I'll just note that it is still heading down. More interesting is that for the first time since July 31, we saw more new highs than new lows on Nasdaq. That, too, is a change with regard to the rally off last week's oversold condition.
And what of sentiment? Well, recall that just two trading days ago the equity put/call ratio jumped to 98%, the highest for this current decline. Monday it fell to 55%, the lowest reading since July 12. So, the bad news is that folks are embracing the rally a bit quickly. The good news is that a low reading pushes the 10-day moving average down (that's good for stocks).
I'm trying to figure out when this oversold rally will have run its course, so we can come back down again, but it's too soon to tell just yet. It's possible we spend the next few days just chopping around now.