Whew! We made it through one day of the scary week unscathed.
Or did we?
The indexes were benign, but underneath there was a lot of slop. There was no whoosh, but there was slop. There was so much slop that the number of stocks making new lows on the New York Stock Exchange and Nasdaq are now nearing levels they last saw in late August when the indexes were much lower than they are now.
The New York Stock Exchange's Hi-Lo Index has finally gotten going to the downside again, though. It stands at .37. Recall it gets oversold under .20. And we all know the only way to get these indicators down is to see some selling. But I want a whoosh and all I've gotten is dribble at best. It's as if there is a magnet attached to the S&P 500 at 4450. As a reminder that is where the S&P closed the second quarter: 4450.
There is one other indicator that finally got moving in the last few days: the 21-day moving average of the International Exchange Commission Call/Put Ratio. It is finally coming down again since it has now seen five consecutive days under 1.0. The last time it had that many days under 1.0 was the April low. Before you get excited about that let me point out that the readings are all still hovering around .90. In the spring they were in the .70s as you can see from how low the chart got. But it is finally tumbling again into the "oversold" zone.
Let's turn now to the dollar. It was on that "scary" list I made in yesterday's column. We can see why, though. Notice that the dollar made its low as we were getting intermediate-term overbought in mid-July. Now look closer and note the final week of August: Do you see that whoosh in the buck? That was when stocks had that short-term oversold rally.
Yes, the dollar matters. And it does appear to have broken out in early September. But let me remind you that last Thursday (that's the big spike up day you see on the chart) the Daily Sentiment Indicator got to 91 for the buck. In the ensuing two days the buck has backed off marginally, with it closing near its low on Monday. The DSI has fallen as well; it now stands at 82.
So here's what I'm watching: 104.50.
In currency terms, it is far away, but that is the support line you see there. It is essentially last week's low, as well. Should the Dollar Index break back under 104.50, it will have given up that Thursday spike. It will have fallen under support and it would be the first time since the July low that it has made a lower low.
So you can watch energy. You can watch bonds. You can even watch stocks. But I am focused on the dollar to see if we can get a change in this market.
Finally, I was on a the Action Alerts PLUS weekly podcast. Take a listen here.