Can you feel it? It's in the air. It's that sense that folks who have been so bearish and cautious and concerned are allowing those feelings to evaporate, as they become more bullish.
It began quietly on Wednesday morning, but by the close -- when for the first time in days the market didn't sell off -- there was a collective sigh of relief.
And then came more positive chatter. The chatter almost always arrives before the indicators. You see the put/call ratio ended the day at .89, which I still consider relatively high. Should it slip under .70 or should the equity put/call ratio slip under .40, I would think there is an indicator we can point to that shows the shift. For now it's simply chatter.
Even the Investors Intelligence bulls only ticked up two points to 42%. The bears didn't budge, so the bulls came out of the correction-minded camp. On Thursday, we'll get the first real look at the more fast-moving surveys when we see the American Association of Individual Investors and the National Association of Active Investment Managers results. The former are surveyed Tuesday and the latter Wednesday.
Away from that, breadth was good. It didn't lead on Wednesday, but considering the mega-cap tech stocks rallied, I take it as a win when breadth can stay OK, if they are up. Look at the McClellan Summation Index, because you might not need a magnifying glass to see how hard it is trying to curl up.
I do want to note that the Hi-Lo Indicator did not budge on Wednesday. That makes three days it has sat at .31. With new lows continuing to improve (contract) it is possible this will not get down to .20, where I would consider it extremely oversold on an intermediate-term basis.
I would note that the utes, which I warmed up to again last week, have had their first consecutive up days in six weeks. That's a change in pattern. And we can even see the possibility of a "W" forming these last few weeks. When the utes are rising, the market tends to do better overall.
In terms of patterns on the chart, I have been asked about the head-and-shoulders top in the S&P. I think it is quite obvious and obvious patterns tend to fail. But how many see the possible head-and-shoulders bottom that has developed over the last month? Oh sure, the neckline is quite slanted downward, but it has potential.
For the time being, the market is still a choppy mess, but as I have noted for the last week or so, breadth has improved quite a bit in the last few weeks. As long as breadth is better and sentiment isn't too bullish, the market seems OK for now. Should folks turn bullish quickly or should the good breadth evaporate, that would be problematic.