The S&P 500 is actually down 10 points on the week, which in the big picture is still part of the giant sideways we have seen for weeks now. But does it feel different than 10 points to you?
A few days ago we looked at the stalled-out Industrials. Nothing has changed, but since the day after Memorial Day they are down 2%.
Then there are the banks. We looked at this chart a few days ago, as well. Is that a giant sideways or is that a rolling over? We don't know yet, but we do know that's another favored group that is down 2%-3% since Memorial Day.
And then there are the Transports, which we also checked in on, noting they, too, were struggling since early May. The difference on Wednesday was that all of a sudden everyone noticed the Transports have begun to struggle. Six weeks of sideways correction didn't bother them, but UPS (UPS) talks about margin pressure and all of a sudden it's, "Wow, have you seen the Transports?"
Do you think they have seen the homebuilders yet? I haven't heard enough chatter about them since lumber was on everyone's lips.
Yet there is one thing all of these charts have in common: They threaten to break and they don't. Oh, sometimes they even break -- and then snap right back. If you want to see a change in the market we have -- the giant sideways churning market we've had -- then you need to see charts like these break down, otherwise, it will just be more of the same group rotation.
There is something that has changed and that is sentiment. The equity put/call ratio on Tuesday was 0.35, which is really very low. The last two readings that were that low were January and February (red arrows). I won't say either one marked an exact high in the market, but I will tell you the market had limited upside thereafter. Note that at the May low, before this recent run, the equity put/call ratio was up at the blue arrow; that's how much sentiment has shifted.
I have said, I expect the 10-day moving average of the total put/call ratio to bottom out in the next several days as I expect it to turn upward early next week. It is currently at 0.71. The two prior lows were 0.69, so it is closing in on an extreme.
The Investors Intelligence bulls picked up one point, which is not a big deal. The bears, however, are at 16.2%, which is the lowest since heading into that August high last summer.
Breadth remains positive, but it is mostly positive in the speculative names that were hot in January and February. It is going to take charts breaking down to change the market we have so if we do pull back from here that's what I would watch for.
Do they get saved or do they break?