It's always an interesting day in the market when something that should have happened did not.
Look at this: For the first time since January, the Russell 2000 was not green on the day. Breadth was barely red, which is also different because usually when the Russell loses 10 points breadth is pretty crummy.
But it's the bonds that really captured my attention. They had quite a move (up in price, down in yield). Let's take a look at the chart of the bond exchange-traded fund (TLT) to see that bonds are closing in on that spike high from two weeks ago. The blue arrow shows where we were and you can see we are now mere pennies below there.
Now take a look at the chart of Russell 2000 ETF (IWM) . The move down in July in IWM was almost tick for tick with the move up in bonds. But now, look where IWM is relative to where it was when bonds were last here. IWM is now $220 and it was $212 back then. That is more than just pennies.
There are the banks, as well. We'll use SPDR S&P Bank ETF (KBE) for this. Two weeks ago, that ETF had plunged to $47 and Monday it closed at $49. That, too, is different.
Finally, the mega-cap tech names did not rally on higher bonds, either. So, we have a slight change in pattern. It is possible that a few days from now, they will all catch up with each other, but for the time being, this is a divergence I am focused on, especially because the Daily Sentiment Index (DSI) for bonds is back to 85. That last peak two weeks ago was accompanied by a DSI just over 90.
Sentiment-wise the put/call ratio started the day quite low, but as the day wore on and stocks began to sink, it moved up, ending the day at .90. Recall in the last two weeks, since that low in the market (high in bonds) the put/call ratio has stayed elevated except for one day, last Thursday when it moved to .67.
In prior rallies it was not unusual for the put/call ratio to sink immediately after we lifted off a low. This time it happened once, just as we peaked late last week.
You will see that the Overbought/Oversold Oscillator did move up, and it moved up quite a bit. Again, this is the math. It is based on breadth, which means it is back to an overbought condition.