• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Hear That Knocking? That's Folks Getting Giddy

After Thursday's shakeout and bearishness, people have started to border on giddy -- let's see what else changed over the weekend.
By HELENE MEISLER
Nov 05, 2019 | 06:00 AM EST

We saw some changes in the indicators since I last reported on Thursday morning, so let's break them down.  

We'll start with breadth. The indicators here are still rising. It was a little dicey on Thursday with the down move, but it turned out to be a shakeout. And, boy, did folks get bearish in a hurry that day. The put/call ratio zipped right up to 116%. That's incredible for a mild down day.

But the number of stocks making new highs for Nasdaq finally increased over the July reading. The New York Stock Exchange did not have as good a showing. It's still showing the number of new highs as fewer than prior times in 2019. So good for Nasdaq, not so good for the NYSE.

Now back to sentiment. You see that is where the real change has occurred. After Thursday's shakeout and bearishness, folks have started to border on giddy. They are not quite there, but they are now knocking on the door.

The put/call ratio for Monday was 65%. This is the first reading under 70% in almost two years. How's that for a change? Let's take a look at when we saw the last three readings under 70%. There were two in January 2018. The first was early in the month and the second was late in the month. Clearly the one late in the month was more important than the one early in the month.

Prior to that was one around Thanksgiving 2017. Let's take a look at the chart of the S&P 500 from that time. The blue arrows represent the three instances. With the first two, the market went into a chop mode for a few days. It did so with the last one as well, but four days later the blow-off top was all we had.

Now let's take a look at the 10-day moving average of this indicator. The two green arrows represent the first two arrows on that chart above. So our takeaway is it was a one-day reading, but the trend was that sentiment in general wasn't that giddy.

Now look at the current situation: The 10-day moving average of the put/call ratio is kissing 85%. This is the lowest area we've seen in the last two years for this indicator. To go much lower than this mid-80s level, we have to go back to late January 2018, when the moving average was at 76%.

Let me point out that in late January 2018, the McClellan Summation Index had been heading down for a few weeks already and the number of stocks making new highs had been contracting since mid-month, not to mention breadth was pretty poor. None of those conditions are in place right now.

Sticking with sentiment, the Daily Sentiment Index (DSI) for Nasdaq is now 86. The S&P has 83. Getting over 90 has rarely been a good time to add to positions. The market doesn't always back off immediately once these get to 90, but within a few weeks, we typically see some sort of correction.

I expect the Investor's Intelligence bulls will be well over 55% this week when they are reported Tuesday evening. If that is the case, then we will have sentiment too bullish, but we won't have the indicators rolling over. If the indicators start to roll over, that would be a reason to be cautious. Otherwise, it's more likely we just see a pullback or chop to relieve the bullish sentiment.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Meisler had no position in the securities mentioned.

TAGS: Investing | Stocks | VIX |

More from Stocks

Emotions Run High as Indexes Slip

James "Rev Shark" DePorre
Jan 27, 2021 4:44 PM EST

I've raised a bit of cash, but it's still unclear what will emerge from here.

3 Important Questions the Fed Answered Wednesday

Tom Graff
Jan 27, 2021 4:30 PM EST

Powell was asked a number of questions about asset bubbles and financial stability risks during his press conference.

'Mortal Kombat' on the Market

Peter Tchir
Jan 27, 2021 3:54 PM EST

Let's pick apart the wild action in individual stocks -- especially GameStop -- and see what to expect going forward.

Butterflies Are Free: This GameStop Options Play Is Hardly Ever Seen

Timothy Collins
Jan 27, 2021 3:01 PM EST

I'll take a 66% risk-free rate of return in six months anytime.

Walgreens Boots Alliance Rallies Ahead of Earnings

Bruce Kamich
Jan 27, 2021 2:45 PM EST

Has WBA rallied too much?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:48 AM EST STEPHEN GUILFOYLE

    Cashing in Some More Chips at Stocks Under $10

    We're trimming a position for a big gain today.
  • 08:34 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 1/27/2021

    The "correction" can be coming sooner than we thou...
  • 09:35 AM EST CHRIS VERSACE

    Another Big Winner for Stocks Under $10

    We're ringing the register Tuesday morning.
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login