With the exception of that one week surge in the S&P 500 three weeks ago, the S&P is trading pretty much where it was in early October. With the exception of the one week plunge in mid-September, the S&P is trading were it was right after that initial early September fall. Go back one more month and the S&P is where it was in mid-August. That's a whole lot of chop, isn't it?
Everyone seems to think the election is the excuse. And they seem to think all will be right with the market once Nov. 3 is past us. Almost everyone interviewed on television says the same thing: Once we're beyond the election, the market will be OK again. I'm not sure how they can be so confident about that, but I suppose that sentiment is the reason that we still see so much complacency on an intermediate-term basis.
The Investors Intelligence bulls were at 59.6% last week. The American Association of Individual Investors saw more bulls than bears for the first time since March. Even the Consensus Inc. bulls are nudging up toward 70%, a place that has said "too many bulls" in the past.
Heck, even my weekend Twitter poll, which I ran, despite not being at my desk, showed 56% were looking for more upside this week. Well that was before Monday of course. My point is, prior to Monday there was still plenty of complacency around.
I am not at my desk today but let's vote anyway!
The next 100 points for the S&P?— Helene Meisler (@hmeisler) October 24, 2020
Did Monday's action change that? Of course it did, at least for the day it did. We saw 91% of the volume on the downside. We haven't seen that since late June, so consider that we never saw that sort of fear in the September decline. High levels of downside volume indicate a small level of capitulatory action, as folks are selling with urgency.
Since March 1 the downside volume has been 90% or more on nine occasions. Seven of those times we rallied the very next day. The last time was late June and prior to that was June 11, that massive down day. The blue arrows show you the days. One rallied for about a week before coming back down and the other just lifted off.
Then there is the put/call ratio. For months I have complained no one was buying puts. That changed on Monday when the put/call ratio pushed up to 1.11. Stockcharts did not have the chart updated yet but the dot in the upper right represents Monday's reading.
Notice that we see the twin high spikes in May. The first one led to a multi-day rally, the second one to a multi-week rally.
My own Overbought/Oversold Oscillator is oversold, as well.
I think we get a short-term rally. It's post the election I'm concerned about, if that complacency is still present, because that would make the set up vastly different than we had heading into 2016.