So much for my idea that we should rally and come back down. We can't even have an intraday rally. There were some very short-term extremes in Monday's market, but I would also reiterate that the intermediate-term indicators, having just reached overbought readings about three weeks ago, are not close to being oversold.
Let's look at some of the shorter-term extremes though. Breadth was so bad that the McClellan Summation Index now requires a net differential of plus 4,400 advancers minus decliners on the New York Stock Exchange to halt the decline. That means using this particular indicator we're oversold.
I think I should stop here and point out that this "what if" is trying to capture an oversold condition. The actual indicator -- the Summation Index -- is trying to capture the direction of the majority of stocks. So when the "what if" gets extreme, it doesn't mean the Summation Index is turning. That takes time -- it's another indicator that takes time.
There was 91% of the volume on the downside on the New York Stock Exchange on Monday. That is usually the sign of a short-term extreme in that there was too much selling for one day. What strikes me curiously though is that typically a high down volume day will have a high TRIN (Trading Index) and the TRIN was only 1.24. Over 2.0 is what we usually get on a 90% down day.
Sticking with the oversold theme. The Nasdaq Momentum Indicator will get oversold around Thursday of this week. When I walk Nasdaq down 200 more points in the coming days, the indicator starts to rise, even though price keeps going lower. That makes it oversold later this week.
My own Oscillator, however, does not show a "good" oversold for at least another week, although I suppose if we slide on Tuesday and Wednesday this week, I could make the case for it being oversold by Thursday.
On the sentiment front, the put/call ratio went to 124%, which is the highest since the May decline. The put/call ratio for exchange-traded funds went over 200% for the first time since May 31, as well. So there was much more fear creeping into the market on Monday. As a reminder, the 10-day moving average of this indicator is still too low to show any sort of persistent negative sentiment yet.
I still think we should bounce. And I still think we should come back down after a bounce. But so far the market is opting for one direction instead of zigging and zagging.
I want to end by noting that the Daily Sentiment Index (DSI) for bonds is now at 98. That's extreme. What's more intriguing is that the utilities have stopped participating on the upside. For the last two months, they have refused to break under $800. If they do, it's a change.