Let's review the last six weeks or so in the market.
Complacency crept in. Then the banks fell apart and complacency went right out the window. Well, sort of. Technology was deemed the safety trade for a little while.
Then last week folks bought the banks and announced they were OK again. So of course this week the banks had another rug pull. (More on that below).
This week complacency left the tech stocks when folks finally sold their beloved tech stocks. Oh not to a great extent, but software took it hard as did semiconductors. Now after the close the mega-tech earnings were OK enough to get folks thinking tech is OK again. But banks? Not so much.
That is basically this market in a nutshell. Rotations all over the place and the sentiment that skitters around with it. And the narratives! I keep picturing a bunch of cockroaches skittering around hither and yon.
So let's start with the SOX, which I noted earlier this week I thought ought to come down to the 2900 area. Talk about instant gratification as the SOX closed at 2906, down over 3%, on the day. I do not like the semis-still-but after five straight red days (the SOX hasn't gone to six red days since September) and a move to support I believe there should be a short-term bounce.
The Bank Index still has a bit more work to do before it has a proper retest, but so far it is heading in that direction.
As for the indicators, the McClellan Summation Index, which I believe tells us what the majority of stocks are doing, is heading down now -- enough that we can see it. It now requires a net differential of +1,900 advancers minus decliners on the NYSE to halt the decline, which is not enough to consider it oversold yet but it is getting there.
The number of stocks making new lows on Nasdaq has now nearly doubled since a few days ago. I put that on the negative side of the ledger. The New York Stock Exchange saw an increase, but not nearly as dramatic.
To recap, the intermediate-term indicators are in the process of getting overbought or have already achieved that (the Hi-Lo Indicator last week is an example of an indicator that has already reached an overbought condition). The shorter-term indicators are getting a bit oversold.
For example the breadth on Nasdaq had been red for five-straight days and eight of the last 10 days. That makes it lean slightly oversold.
Sentiment has been mostly complacent in my view, although this week has likely changed a few hearts and minds. Just notice that the 10-day moving average of the equity put/call ratio is now hovering around .65 which is the lower end of the range.
I think if you are looking to buy, it's best to wait until the indicators run their course on the downside and cycle back to a decent oversold reading.