I hope you noticed it: The trading range is alive and well.
I also hope you noticed that everyone is talking about it. I really am shocked my mother still hasn't called to ask about it!
Before we get to the trading range, let's talk about the statistics from the trading day. We'll begin with breadth, because it was the best breadth the New York Stock Exchange has seen in almost a month. That means the cumulative advance/decline line has made another higher high. I don't know how you spin that bearishly.
The better breadth has finally translated into a better McClellan Summation Index. This is the first time since early July that this indicator has not only moved up, but has made a minor higher high. Do you see how the indicator peaked in mid-July? That was the sign that breadth was not moving upward with the indexes. It is my view that this particular indicator tells us what direction the majority of stocks are moving. It will now take a net differential of negative 1,900 advancers minus decliners to turn this back down. That's the best cushion this has had since early July.
Then there are the number of stocks making new highs. Yesterday I noted how the new lows were contracting on the declines. But we haven't talked about the number of stocks making new highs since mid-July, when this indicator started to contract. It expanded on Wednesday, to the most new highs since early August.
The number of new lows on the NYSE was the fewest at 30, since early July, so that, too, is a change. You might recall how I harped in the latter part of July about the increasing new lows. Even a few weeks ago I noted that 50-plus new lows in a rising market wasn't a good sign. So this is a change.
But we are still in the trading range. We'd need to cross over 2940 enough that we can see it with our bare eyes to believe it had finally broken out. I would like to see it breakout, because I want to see what is up there. By that I mean, do new highs confirm? Does breadth confirm? So far, it looks like they will.
If you want to fret, then fret over how fast sentiment will change if we breakout to the upside. I know it seems as though everyone is bearish -- we have discussed this quite a bit recently -- but the put/call ratio for exchange-traded funds came in under 100% on Wednesday for the first time since July 10, So, it is my sense that if we breakout, we will see sentiment turn in a hurry.
And what if we don't break out and we head back down? I refer you to my column from Tuesday: I think heading back down would give us positive divergences.