We may have slipped out of that 100-point trading range in the S&P 500 for an hour or so on Friday, but in the end, like a magnet we moved right back in it.
Now, I am going to draw a different line, because I want you to see what is different between this decline and the same 7% decline we had in June.
I tend to use thick trend lines, because I don't believe anything is that exacting. I often use the expression "area," because a few bucks here or there shouldn't matter in the big picture. Last week, I noted that there were some changes that had transpired in the last two months.
One point I noted, the Nasdaq had not had more than two consecutive red days since March, and in early August, we saw the first set of three red days. Another point was that we had broken the long-standing channel on Nasdaq. Finally, the S&P had notched its first consecutive red weeks since March. The S&P is now at week three on that count.
On the chart itself notice that despite this 100 point trading range the last two weeks the lows are actually down-sloping (although each lower low is quite minor). Notice that was not the case in June's correction (blue line) when we made a higher low on that second leg down.
Another thing that I believe is different than June is sentiment. If we were to match the chart of the Sentiment Cycle against the S&P, we are at Subtle Warning. Some might argue that last week put us into Overt warning, but it's surely the zone.
I would probably mark the June correction as Denial, possibly Aversion. But I admit that would be in hindsight, although I tend to mark Enthusiasm as the point when the Investor's Intelligence bulls get over 60% and that did not occur until late August.
In any event, just to complete the sentiment discussion, let me point out that my weekly Twitter Poll, which admittedly is quite un-scientific, had a spread between bulls and bears at that late June low at negative 22. As of this weekend, it stands at negative nine, so folks were clearly more bearish then than they are now.
My Saturday Poll with the S&P.September 19, 2020
In fact, what is different sentiment-wise is that the Russell 2000 was up about 2% last week. In late June, it was hovering around at down 10%. And while Nasdaq, and more specifically big/mega cap tech, was not down that much in late June, it was down. When everything is down, you tend to get a lot more bearishness than when one group is down and another is up because it becomes a split decision.
The 10-day moving average of the equity put/call ratio is a mite higher than it was in late June, though. I suppose three weeks of unwinding all those calls will do that, but at least it is rising. On Friday, I noted that I didn't think we had seen anything even close to panic. That's where things are also different. In June, we saw the one-day readings of the equity put/call ratio over .70 twice. We haven't seen a reading that high even once this time.
This leaves us where we have been. Some improvement in some of the breadth indicators, some short term oversoldness but in general the correction feels as though it is not yet fully complete.