It feels as if all I need to do is complain loudly and long enough, and the market will do its best to fix the problems. How can I possibly complain, now that the small caps finally rallied? I have been waiting for this for weeks.
To see what I mean, check out the chart below. Note that this is the level the ratio has bounced from since December. Not shown on the chart is this is the same level it was at the 2016 lows. So this area is important. And as long as small caps are not sitting it out, my complaints will be minimal.
But I will complain. For example, we have new highs in both Nasdaq and the S&P 500, but the number of stocks making new highs is still contracting. Nasdaq is most glaring: Not even 100 new highs were reached for this exchange. More improvement in the Russell 2000 should help that. But to put things in perspective, at the January 2018 high, both the Nasdaq and the New York Stock Exchange had over 400 stocks each making new highs.
I suppose this is the reason the sentiment indicators are still complacent and not giddy. It really felt giddy during the trading day, but the statistics don't confirm it yet. The Daily Sentiment Index for Nasdaq, for example, didn't budge from Monday's reading of 93. Yes, 93 is high, but still no movement. That's a shock.
The S&P 500 rose to 88 from 81, but a move over 90 is more likely on a new high. That's what I expected. The daily put/call ratios were neutral as well. What was extreme? The put/call ratio for the Volatility Index was under 20% for the third time in four trading days. Someone is awfully persistent in their view that the VIX ought to go up.
The Investors Intelligence Bulls slipped a bit back to 53.4%. But the bears slipped, too. They now number 18.4%, which is the lowest reading since September's 18.1%. In January 2018, they were 12.2%. The low bears show giddiness, but not the bulls, which remain under 55%.
That leaves us with a market that had better breadth on Tuesday, but still not enough to turn the McClellan Summation Index back up. That would require another day of good breadth for it to stop going down, and then one more to turn back up. Things improved, but not enough to change any of the indicators. The only real change was that the small caps finally outperformed.