There are times the market defies all logic and does something completely unexpected. But mostly the market really is logical. The issue is that everyone always wants to know what news will rally the market or what news will sell the market off.
If we know what that news is, then it is often already priced in. Did we know that this recent short-term overbought reading would be helped along by news out of China on Apple (AAPL) ? I sure didn't. But then we know I am so bad at narratives that I don't even try to provide them. And when I do, I often get it wrong or it doesn't happen in the time I had anticipated.
While everyone was fussing over beloved Apple (although it might soon become "hated Apple") no one seemed to notice that the Russell 2000 is about to kiss its 200 day moving average again. Long time readers know that I do not tend to fuss over the 200-day moving average, but as I noted the other day, many do so we must be aware of it. We also must be aware of the direction. Two hundred trading days ago was mid November. In mid-November the Russell was trading just around this level. That means in the next month or so the 200-day moving average will drop those numbers and add the current ones, likely keeping the moving average flat to slightly up.
I bring this up, only because as we are moving from overbought toward oversold, there is often a point of panic in the market, where something occurs and folks get a bit hysterical. Maybe breaking that well-watched moving average line next week would bring us some panic.
We can finally see the short-term Overbought/Oversold Oscillator heading back down. It is not oversold yet but at least we finally see some movement there.
I was disappointed in the day traders at the American Association of Individual Investors (AAII) as they got much more bullish this week (did they not see Apple?!). That ought to come back down next week, but bulls at nearly 50% is not what you want to see if we are to get an oversold condition with negative sentiment.
But the folks over at the National Association of Active Managers (NAAIM) did do what I expected, and that is reign it in. Their exposure went from 60 to 50.
Then there is the put/call ratio, which saw the equity reading at .98 on Tuesday. The 10-day moving average of this indicator has gone from .50 in mid-July (when the market reached an intermediate-term overbought condition) to .80 currently. If we get some panic next week this will start to show some real fear.
In any event, it is still all about the bonds and they have stalled out for now. Heck, even the utilities are trying to bounce off that line I showed you on the long-term chart just before my vacation.
But please don't ask me why -- because we've already determined I'm not very good at narratives.
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