Well that quarter ended with a big fat whimper didn't it? The curious part is that everyone seems to have last year's fourth quarter at the top of their minds.
I am fond of saying that the market shows us a pattern over and over again, and as soon as we learn the pattern, the market changes the pattern. This is the reason we rarely repeat a market action so soon after we've seen a particular market action. In other words, just because we collapsed in the fourth quarter last year does not mean we will collapse in the fourth quarter of this year. When so many are so prepared for a market move, it rarely turns out that way.
That doesn't mean we can't rally and come back down (my assumption), but much has changed since last year's fourth quarter. Heck, much has changed since the spring of this year. As we headed into last year's fourth quarter, no one thought a trade deal would fall apart, or at least the market wasn't positioned for it. Now, it seems a trade deal falling apart would surprise so few.
Last year, the Fed was in hiking mode. Remember? Interest rates were kissing 3% last year. In fact they were a bit more, 3.2%. Now they hover around 1.6%. That, too, is different.
That is not to say I think the oversold rally on Monday was terrific; it was not. It was lethargic. The worst part of it all is that breadth lagged. Remember when the big cap indexes rally and breadth lags the indicators roll over. That's how we get negative divergences.
So essentially not much changed in terms of the indicators after Monday's trading. The McClellan Summation Index still heads downward. The 10-day moving average of the number of stocks making new lows continues to rise.
The biggest change was folks seemed to have upped their put-buying, as the put/call ratio ended the day at 117%, which is the highest reading since it was 120% on Aug. 30. It also makes it nine-straight days where the ratio is over 100%. So, at least there is some skepticism out there. To put that in perspective, the blue arrow on the chart below denotes where the 10-day moving average of this indicator was heading into early October last year. It was under 100% and now it is over 1.05%.
I do want to close with a chart of SPDR Gold Shares (GLD) , an exchange-traded fund for gold, since I was asked to comment on it. Back in late August and early September, the Daily Sentiment Index (DSI) for gold was 96, and I urged caution. Since then, it has formed a small head-and-shoulders top, and Monday it broke the neckline. It only measures to the $134 area, but more importantly for me, the DSI has backed off to 31. Any further weakness in GLD could get sentiment on it bearish in a hurry, which would make me much more interested in it on the long side.