The S&P has not had a string of consecutive up or down days in the last week. I look at that and think, that's the oversold condition doing the best it can do on the upside, which is chop. Will that change when the calendar turns to March?
I am not one who focuses too much on seasonality. In fact there are times when we see a statistic that says something like, '95% of the time the market is up on X day' and I can almost guarantee you that if I figure, what the heck, I may as well trade that seasonal statistic, that I will capture that 5% of the time it does not happen. I would rather stick to my indicators.
And those indicators have not changed much. In fact I can report that while breadth was flat on Tuesday (a positive) while the S&P lost 12 points, the McClellan Summation Index continues to head down. I can even report that we came into Tuesday with this indicator requiring a net differential of positive 2,700 advancers minus decliners on the New York Stock Exchange to halt the decline and we enter Wednesday with that number at positive 2,600. Barely a change.
I can even report that Monday saw Nasdaq new highs and new lows almost even. It even occurred again on Tuesday. Yet the Hi-Lo Indicator still sits at .43 where it entered the week.
Or how about the bonds? TLT once again held 100, which happens to be approximately 4% on the yield on the Ten Year. We have not breached 4% yet. Was Tuesday's action month-end stuff? I don't know but as I have noted it continues to hold.
Should the bonds plunge (and iShares 20-Plus Year Treasury Bond ETF (TLT) breaks $100) I have no doubt that there will be hysteria from investors. There will be non-stop coverage of the yield getting over 4%. And the Daily Sentiment Indicator (DSI), which currently resides at 25, would surely plunge. So at this point, any surge up and over 4% (or under $100 for the TLT) would probably represent a low for bonds.
The best news for the market is that the complacent sentiment we had as we entered February is moving toward bearish. Just look at the 10-day moving average of the put/call ratio. In early February, it ticked under .90, rivaling the level we saw in late March. Now it finds itself just over 1.0.
It is not extreme with this reading, but you can think of the move upward as a picture of the rise in bearishness. As this rises, folks get more bearish, as it falls, they get more bullish or complacent. I don't think we're extreme yet but at least the shift is on.