If you think the action on Friday changed anything in the market, then I am here to report not much changed. Oh sure, the banks which had been telling us for weeks they were tired of going down and tired of reacting to lower interest rates, finally moved up. But aside from the move in financials and bonds, there was very little movement elsewhere.
For example, the number of stocks making new highs refuses to expand, despite the new highs in the S&P 500. Despite the Russell 2000 trying to come alive as well. That tells me there is, so far, very little interest in buying. I'll call it a passing interest.
Yet, when Nasdaq finally had a down day, its worst in a week, the number of stocks making new lows contracted instead of expanding.
Or when breadth had its first consecutive days of positive readings in a week, the McClellan Summation Index continues to sit there. We can get a better magnifying glass to see that oh so tiny little uptick in this indicator -the first since June - but did it really change? Not so much. Here's the good news though: it now requires a net differential of -800 advancers minus decliners to turn back down. That is the largest cushion this has had in two months.
And what of the Overbought/Oversold Oscillator? I'll call it leaning overbought, but even at that, it signals more indecision than much else to me. The New York Stock Exchange is just over the zero line while Nasdaq still cannot get up and over it, which makes Nasdaq - read that as non-mega caps - a smidge oversold. A nothing burger.
Surely, sentiment has shifted. Oh, I suppose we can say it has but maybe not in the way you'd think. Recall last Thursday the Daily Sentiment Index for Nasdaq tagged 92, and then Friday Nasdaq went down while the small caps rallied. So, sure that backed off some - it is now 87 - but enough to think it's a big reset? Nope. One up day and it would be right back over 90.
Yet, we find Friday's put/call ratio was .95. Is that the weekend effect? Perhaps. I noticed a few months ago we've started to see elevated readings on Fridays. But it's more than that. Do you recall for months on end we looked at the equity put/call ratio with non-stop readings in the .40s? Since mid July, there have only been four such readings. That is now reflected in the 30-day moving average of this indicator.
Why does it matter? Because for the first time in a year folks are clearly buying more puts - or fewer calls - on a regular basis. That tells me that if the market got whacked in the next week or so, this would shoot right up, which is different than shooting up from a lower level because it would indicate panic much more quickly.
And why could we see some sort of whack in the market? Well, the DSI for the VIX promptly fell to 11 on Friday. As a reminder, readings under 10, or over 90, are short-term warning lights that a reversal in that index or security is likely imminent.