Was it just last week everyone was so excited over the big breakout in the small caps? I believe it was. It was just two trading days ago that the Daily Sentiment Index has crested 90 for Nasdaq for the second time in a few weeks.
Now to show you how much that jumps around -- it is a daily indicator -- it is now back to 70. And the DSI for the Volatility Index that was single digits late last week? That's now 24. I guess a move from 11 to 15 for the VIX will do that.
As for the pullback in the market, there was quite a bit of selling, but it wasn't panic selling. If it was panicky, we would have seen the TRIN (Trading Index) over 1.0. Instead it was just shy of .8. I have no way of quantifying this for you, but to me it felt like the stocks that were the index-movers were the ones taken to the woodshed. In other words, it was big cap growth names that had all the action.
That makes sense, too. You see, when breadth lags, it's usually because the market has gotten narrow. It's because the market has spent so much time focusing on those big cap growth names, the ones that move the indexes and leave everything else to languish. And as you know, the majority of November the market focused on the index-moving names and left everything else to languish.
While breadth was poor during Monday's 27 point decline for the S&P 500, the overall a reading of negative 1,325 (net advancers minus decliners) wasn't that bad. It could have been a lot worse. But let's take a look at the McClellan Summation Index. When we looked at it last week, I noted that it looked similar to the late April period when the small caps had that big surge, but the Summation Index shrugged and didn't respond on the upside. Remember when the Summation Index is rising, it is a lot easier to make money on the long side in many areas, not in a concentrated group, because this tells us what the majority of stocks are doing.
Now the good news is that this indicator now needs a net differential of positive 1,800 advancers minus decliners to halt the decline. Once it gets to where it needs, positive 2,000 or more, it has stepped a toe into oversold territory.
I can also make the case that my own Overbought/Oversold Oscillator is a little bit oversold, too. The emphasis is on a little bit.
I will note there was no significant pick up in the number of stocks making new lows. That is a change. It may be some function of us entering December. These are 52-week lows and you might recall that massive plunge last December 2018. But I don't like to rationalize an indicator, so I'll give some credit that Nasdaq new lows did not surge back to triple digits.
Let's now move on to the 10-day moving average of the put/call ratio. It has been moving up lately, but to me it is in the middle of nowhere now. A push up, at least to more than 105%, would tell me we've got some fear in the market, enough to call the market a bit panicky.