Monday was not a very pretty day in the market. But it takes bad market days to get sentiment more bearish, doesn't it? So in that respect, Monday's statistics fit the bill.
Let's start with breadth. The S&P 500 was up 8, and breadth was negative. Sure, it wasn't negative by that much -- 150 issues -- but remember that is not what helps the indicators. What rolls the indicators over is poor breadth and higher indexes. That means the McClellan Summation Index still needs +1,500 advancers minus decliners to turn back up.
But look at the number of stocks making new lows: Nasdaq saw new lows expand, again. They now number 115, which is the highest reading since the May decline. But this didn't happen in a market that was down and turned around. Nadsaq was essentially up all day. I cannot find a way to spin this positively.
Nasdaq's advance/decline line was red, as well. It has been red for five of the last six trading days. And six of the last eight trading days. The best news I can offer from this statistic is that it takes negative breadth to turn the market back to an oversold condition. And an oversold condition with negative sentiment is what typically lines us up for decent oversold rallies.
From Low to High
Now turn to the 50- and 200-day moving-average lines. These two moving average lines are very well watched. Back in late May I wrote about the 200-day moving-average line, because we were on the verge of breaking it, and I shrugged. When I looked back 200-trading days prior, I was able to see that the moving-average line was not going to roll over. It is my contention that moving average lines that roll over are more bearish than ones that are rising or flat.
It turns out 200-trading days ago was Oct. 3 (blue circle on the chart). That means that as we head out over the coming months, we will be replacing lower readings with higher readings -- unless we collapse right now, which is not my expectation).
It also turns out -- how curious this all is! -- that 50-trading days ago was May 10, (arrow on the chart). Here, too, we ought to be dropping lower numbers and replacing them with higher numbers, at least for the next few weeks. That means these two important moving average lines should both be rising, or at worst flat. And that should make them supportive at this point, even if somehow we managed to trade down to them and broke them.