Will we get one more rally? That's the question folks have asked. It's possible - maybe even likely -- but let's step back and consider where the indicators are.
First of all, this week is the annual Fed meeting at Jackson Hole so it's hard to be definitive about the market this week since it will be whipped around by everyone's interpretation of what comes out of the meeting. Is the Fed pivoting? Are they standing pat with the hikes? As someone who is not a Fed watcher I will leave that to others to determine. Instead I will focus on the indicators.
For the day to day (i.e. immediate short term) I can just as easily see more down as I can one more rally, but I would lean to at least another rally attempt. One reason for one more push up is the sentiment seems to have soured greatly after Friday. The equity put/call ratio pushed up to .74, the highest reading since late July.
Sticking with sentiment is my weekly Twitter Poll. Folks voted down for the fifth straight week. I have been keeping this poll for just over two years (since the spring of 2020) and if my data is correct (!!) this would be the widest spread to the downside with 30 points in favor of the bears (more downside).
I grant you this is now the fifth straight week that folks have taken the 'under' in my poll. However, when you step back and look at the net differential of the up votes to the down votes a pattern emerges: for the most part my Twitter followers have gotten the trend correct. Notice they were bullish starting in late summer/early fall of 2020 right through late December 2021/January 2022. For most of this year they consistently voted down - even during that spring rally.
But in mid-May they began voting up, which I take as them warming up to the market. Starting in late July they began voting down. Will the outcome be the same? I don't know. Week to week this can be contrary (see the March low) but overall I would say they have gotten the basic trend correct, as in they have known when to warm up and when to stay away.
Now let's look at the indicators. We are no longer overbought, but we are not yet oversold. The intermediate term (30-day moving average of the advance/decline line) gets overbought this week so if we do get one more rally we'll be rallying into an overbought condition.
The Volume Indicator got overbought last week when it tagged the mid 50s.
The McClellan Summation Index for Nasdaq stalled early last week and rolled over midweek. It will now require a net differential of +3.9 billion shares (recall I use volume for Nasdaq, so this is up minus down volume) to turn it back up. The turn down is still quite small so you do need to squint to see it.
The NYSE joined Nasdaq by turning south on Friday. This now requires a net differential of +900 advancers minus decliners to turn back up. This too is small.
Finally since the calendar turned to August the S&P 500 has outperformed Nasdaq. I wrote about this on the first day of the new year indicating that when the S&P outperforms (when the line is going up) we tend to experience more volatility in the market (see the move over the blue line). I discussed this again in June when I said I thought tech/growth would rally (red arrow) because when this heads down growth is outperforming.
So this is now the chart to watch because it hasn't made a higher high yet but if it does (my assumption is it will move up in September) that would be a sign that we're due increasing volatility (my call remains more volatility in late August and early September).