As you probably know by now, I do a weekly poll on Twitter asking which way people think the next 100 points for the S&P 500 will be. It's been a pretty decent contrary indicator, especially when too many lean bearish. Last week you might recall we had about 55% of the respondents bearish just as the Invesco QQQ (QQQ) were tagging that uptrend line that has been such a good guide for the last few months.
This week's poll won't be nearly as helpful, because it was essentially 50-50, with 51% looking for upside.
Saturday poll results.— Helene Meisler (@hmeisler) August 1, 2020
Once again I want to thank everyone for participating. Couldn't do it without you! pic.twitter.com/chv57jql5p
What it does tell us, though, is now that we've rallied and folks feel more comfortable with looking for upside. What I found even more curious, however, was the commentary that took place in the replies. It seems the vast majority think the market acts great. On that score, I would beg to differ.
There are plenty of negative divergences. Heck, Friday saw the S&P 500 rally 25 points and not only was breadth negative, but over 60% of the volume on the New York Stock Exchange was to the downside. That surely doesn't happen often. Even Nasdaq, with its 1.5% rally, had its volume split at 50-50. That does not speak of acting great.
Now, when we plot the number of stocks making new lows on a 10-day moving average, we see Nasdaq with a higher high. The 10-day moving average of new highs for Nasdaq has a lower high. Again, this does not speak of acting great.
But when it comes to the indexes, even the laggard ones, all we see is that it bends, but it does not break. Oh, yes, we've all seen the chart that shows us that five stocks account for the entire rise in the S&P this year and the other 495 are left for dead. That too does not speak of "the market" acting great. But my point is the other 495 stocks might not act great, but they do not break.
Even the banks, as crummy as they are, do not break. They are playing possum with us. They are simply just dead or acting that way. They don't break. They just drift, with no life.
The bottom line is that there are uptrend lines on the charts, even in the groups that have no life and the way this market works is that until we break those lines with any real oomph there will be no selling. But one thing we have learned over the last several years is that once they decide to sell the indexes and break the trendlines, it's like a switch has been flipped and it's as if the upside never mattered.
The S&P has held 3200 for three weeks now. Only now the uptrend line comes in there as well.
I would end by noting that there was a minor change last week in terms of sentiment. The equity put/call ratio was over .50 for four straight days, something it hasn't done in more than a month. Perhaps it was because so many stocks are so lifeless that folks have not bought equity calls so aggressively. But in any event, the 10-day moving average is on the rise.