Folks are struggling. The fence between bulls and bears has seen the bears mosey over to it. A few have even jumped the fence -- but most are now hanging out on the bear side, perhaps sharing a cocktail or two with the neighbors on the other side. They are looking longingly at the bull side, wondering what it's like over there.
We know this transformation began last week, when we saw the Investors Intelligence bulls jump up to 35%. Today we see the American Association of Individual Investors with a move of 12 points up in bulls to 32%, where they were in mid-March.
The bears fell 16 points from over 50% to 37%. That's some moseying over, isn't it? The bears did get as low as 27% in mid-March, so I suppose there is room for further conversion.
However the National Association of Active Investment Managers (NAAIM) are having none of it. Their exposure increased a mere one point over the last week. They are still sitting on their deck, enjoying their cocktails and refusing to stray toward the fence. They are merely waving at the neighbors.
When it comes to the put/call ratio we haven't seen any serious embrace of the market, where the put/call ratio falls, say into the 70s. The lowest reading we've gotten so far is .89, and that was last Friday. But the 10-day moving average of this indicator is now at 1.0, down from 1.16 near the lows a few weeks ago.
OK, so sentiment is shifting, but it isn't really complete. I think the fundamental folks are searching for a narrative that will give them cover to join the rally.
Let me report that I have not changed my view on the market. I still think pullbacks will lead to another rally, but there are a few indicators that I feel I need to point out. Breadth indicators weren't so great on Thursday as they have been on the rally days.
Let's start with breadth. Last week, we had a day with the S&P up 79. Thursday saw the S&P up 76. Last week's net breadth was positive 2170. Thursday's net breadth was positive 1680.
Two days ago, the New York Stock Exchange had 105 new highs. Thursday it had 64. Two days ago Nasdaq had 64 new highs. Thursday it had 34 new highs. I realize much of this is energy stalling out. Recall when the Daily Sentiment Index (DSI) got over 90 on oil the other day I said I expected energy to stall and even correct and that would in turn have an effect on breadth statistics, so this is expected. It doesn't mean I have to like it.
Friday morning we get the Employment report and, with the Daily Sentiment Index on bonds still at 13, if there is any weakness in bonds I would still look for them to rally.
Finally, I recently joined Howard Lindzon's "Panic With Friends" podcast in which I
discussed my methods of chart reading and analysis and more. You can hear it at the following link: https://podcasts.apple.com/us/podcast/market-technician-helene-meisler-of-realmoney-com-on/id1460734936?i=1000564917811.
