Now it's time to watch sentiment closely. Ten days ago there were calls for the S&P 500 to come down to 2850. We'll see if that changes.
My sense is that we never got folks that bearish. We got the Investors Intelligence bulls to 51%, which was OK, not great. It was the bears getting to 21.5% that was worth writing home about. We also never got the put/call ratios extreme, all we did was see the various moving averages come off the boil by moving up from some very low levels.
But now that we have rallied, it will be of note to see how quickly folks get back into the bullish camp. I did not mention my Saturday Twitter Poll from the weekend, because it was 49 up and 51 down, which is a coin toss. But I suppose if I wanted a takeaway from it, then I'd say folks were not expecting follow-through from last week. That's why the sentiment needs to be monitored going forward.
Saturday Poll— Helene Meisler (@hmeisler) October 3, 2020
The next 100 points for the S&P.
Over the last 10-trading days we saw the 30-day moving average of the advance/decline line, an intermediate-term oscillator, get oversold. It has lifted over the zero-line, so it is no longer oversold. But it is not yet overbought. Curiously enough, it should push its way into overbought territory sometime around election day.
You will also notice that the shorter-term Overbought/Oversold Oscillator finally moved. Yes, there was finally a lift after an entire month of milling around in oversold territory. It's difficult to pinpoint the exact day this gets overbought, but by Friday it will be back to overbought. That is one reason I said on Monday morning I expected we'd look back on this week as another choppy week and even if we started the week up we are likely to give some back by the end of the week.
But breadth has been good. It's been good enough to turn the McClellan Summation Index upward. It did turn Nasdaq's using volume up midweek last week and the NYSE's which uses the advance/decline line did so on Friday. That means for the first time in two months the majority of stocks are heading up.
After Monday's action, we even saw the 10-day moving average of stocks making new lows turn back down.
I will finish off by noting that bonds had a big move on Monday, as I'm sure everyone saw. The yield on the 10-year is now at a level that has stopped it in its tracks for the last six months with the exception of the early June pop.
I don't think we can look for a move over that June high but that pattern suggests there is a bit more left in the tank for rates to move up some more.