Folks actually got giddy mid-morning on Monday. But then the market stalled out, and breadth began to leak, and we ended the day with more complacency than giddiness.
Also, while breadth has been taking a breather of late, it still hasn't rolled over any of the indicators such as the McClellan Summation Index. That remains the case, but let me share some math with you:
In the last three trading days, the S&P 500 has gained 35 points. In that same time, net breadth on the New York Stock Exchange has been positive 375. That is the total number, over the three days. It's a good thing the Summation Index came into last week with such a big cushion, or else it would have rolled over by now. The cushion for this indicator is now negative 900 advancers minus decliners. That means that if breadth continues the lackluster performance we've seen, it will take at least another week to roll over the Summation Index. A down day, however, would hasten the move.
But this is why the indicators remain mixed. You might have noticed midweek last week everyone had gotten on that "buy value, sell growth" bandwagon, so of course it reversed. (I wrote about it midweek last week, noting the chorus was a bit too loud.) Once growth stocks rallied, the indexes started outperforming and breadth began underperforming. Healthy markets have breadth outperforming or keeping pace. For now, I'd say it's running in place, trying to keep up.
I do think this is because we saw the market get to a short-term overbought reading midweek last week, and so breadth -- the majority of stocks -- is reacting to that.
Also, Nasdaq saw the number of stocks making new highs increase, although still well off the peak readings. The New York Stock Exchange, though, continues to lag. There are still fewer than 177 stocks on the new high list, which was the peak reading we saw early last week (into the overbought reading).
Early in the trading day we saw the put/call ratio dip under 70%, which is incredibly low. We haven't had a closing reading under 70% since January of 2018, just before the Volatility Index products blew up. But by the end of the day, with so many stocks stalling out and breadth leaking, the put/call ratio ended the day with a neutral reading near 80%. It has, however, pushed the 10-day moving average of the put/call ratio down to where it was in mid-September. I typically like to see it fall under 90%, before I think we've gone too far in terms of sentiment. I was wrong to wait for that in September.
The Daily Sentiment Indicator (DSI) for the S&P is at 81. For Nasdaq is it 83. If the market doesn't pull back in the next few days, we might see these over 90 and that would mean we've gone from complacent to giddy.
Finally, bonds are coming into that 1.8%-1.9% resistance area I discussed about a week ago. The DSI for bonds is at 33. Any move higher in rates could move the DSI down into the 20-area, which for bonds has meant sentiment has gone too far.
As you can see there is a lot on the market's plate as we head into this week's Federal Open Market Committee meeting.