Did the rally start early? Could be.
As I have said, there is not an exact day, but a time frame and you might recall when I performed the "what if" on the Russell Momentum Indicator it began to turn up on Thursday of this week, so that is when the window opened. Can the market be down on Friday or even Monday? Sure. Why not? And it wouldn't matter to me.
The Volume Indicator got oversold this week when it tagged 42%. The Nasdaq Hi-Lo got oversold as well when it finally dipped under .20 (under .20 is oversold). It now stands at .16. The New York Stock Exchange's Hi-Lo Indicator is at .25,so I expect that will be into oversold territory (under .20) by Monday or Tuesday next week.
The 30-day moving average of the advance/decline line gets oversold Monday. So does the Overbought/Oversold Oscillator. It's all the same time frame and as I said on Monday, this is not meant to pick the exact day but the general time frame.
So Thursday, since let's face it, the Russell 2000 has lagged, I performed the same exercise, walking it down 100 points from here. You can see for yourself: It doesn't matter, it still goes up. When price goes lower but the indicator goes up, that is the definition of oversold.
Thursday we saw the American Association of Individual Investors survey where the bulls plunged to 19.2%, which is the lowest reading since September when they were 17.7%. The bears gained 6.5 to 48.4%, the most since they were 52 in late December.
The National Association of Active Investment Managers (NAAIM) dropped their exposure to 42. Recall they were 85 in early February. They were 40 at the December low.
I can even report that the 10-day moving average of the put/call ratio has rolled over. Remember we think of this indicator as such: when it is rising folks are getting more bearish and when it is falling folks are getting more bullish.
Finally the Daily Sentiment Indicator (DSI) for the S&P is now 22. It had gotten to 15 earlier this week. Readings in the teens are yellow warning signs that things have gotten too stretched. So if we pullback or give back any/all of Thursday's gains we know the DSI will become a teenager again, which would be bullish for a rally.
The charts don't look great. The market is not in great shape. But isn't that often the case just before we are set to rally? Bad charts can turn good just as good charts can turn bad. That's why we focus on the indicators.
