We rebounded. Not very well, but rally we did. The statistics and the indicators did not change much, though.
Breadth wasn't particularly good, but it didn't change any of the indicators. For example, the McClellan Summation Index is still heading down, but now it requires a net differential of positive 900 advancers minus decliners on the New York Stock Exchange to halt the decline.
The Hi-Lo Indicator for the NYSE and Nasdaq are both in the teens which makes them oversold. The number of new lows expanded some on Wednesday but not enough to change any of the indicators.
The bonds even rallied. And no one seemed to care.
Sentiment remains pretty bearish. The put/call ratio remains elevated and the 10-day moving average is heading down. The Investors Intelligence bulls ticked up a bit, while the bears dropped one point. So a handful of the correction-minded folks moved back to the bull camp. It wasn't enough to fuss over. I suspect that Thursday's American Association of Individual Investors survey will show another sharp drop in bulls and a rise in bears since voting for that survey ends on Tuesday.
It's easy to be bearish, because the charts look terrible. It's easy to be bearish, because the news isn't great. But sentiment is already lined up and cautious. I mean, the Daily Sentiment Index (DSI) for the S&P is now at 17. Nasdaq's is as well. How much downside do you think it would take to get those to single digits? Not much.
It seems to me we remain in a market that gets too bearish every time we go down. Perhaps that will change at some point, but that doesn't seem like right now. I still think we should rally again.
That's why I want to show you a chart of the S&P dating back to just prior to the 2020 Covid Crash period. Some may argue they don't like the line I have drawn, but let me explain why I drew it. I am of the mind that two points make a line and a third confirms it. The more points on the line the better, the line (this is basic geometry). On this chart, we only have three points, so maybe it's not a great line, but let me note that unlike a steep uptrend line this one is relatively flat. And flat lines tend to be more important than steep ones.
The reason I like this line is because I think it denotes the entire trend in the market after that initial push back to old highs from the March 2020 lows. It begins just prior to the breakout to new highs. Should this line break at some point with any serious oomph, I think it would be a big deal, because to my eyes it would be akin to when the S&P broke 4200; it leaves behind an awful lot of holders at higher levels. So, if you want to be just a chart reader and forget the indicators, that's the line to watch.