There will be those who try and spin Monday's action as bearish. There will be those who try and spin it as bullish. But the bottom line is it is in keeping with the market indicators: mixed.
If you want to spin it as bearish, then it's not terribly bullish when Nasdaq's new lows increase by almost double what they were on Friday, especially when Nasdaq itself was barely down.
If you want to spin it as bullish, then it's not terribly bearish that we barely gave back last week's rally and we mostly sat around digesting. It's also not terribly bearish that the put/call ratio was very elevated all day at around 115%.
So why isn't this rally as robust as say, the rally off the May low? Well I am sure there are a variety of reasons, but for me it's all about the indicators. In May, the market fell 7%; it has barely declined in recent weeks. Recall we were trapped -- and still are -- in a trading range.
Also in that month, the 30-day moving average of the advance/decline line had a chance to get oversold. That is not the case now.
In May the Volatility Index got jumpy: Look how it surged from 13 to 23 in a matter of days. Heck, even in August it went from 14 to almost 25 in a few days. Now what did it do in late September? It made its way gradually from 14 to 21 and it took over two weeks to do it. Was that panicky? I don't think so.
In May, the Investor's Intelligence bulls came down gradually over five weeks from 55 to 43. In our current environment, we went from 55 to 47 in one week.
That month, the number of stocks making new lows on Nasdaq went from nearly 250 to 100 in two weeks. Now we had 180 two weeks ago and we still have 116. Why aren't they contracting more? I have some thoughts --like that now we're into tax-loss selling season, but that is rationalizing an indicator, something I prefer not to do. Also, 116 is a lot of new lows for a day the market went nowhere.
Look at how the Overbought/Oversold Oscillator zoomed right up over the zero-line in late May/early June. We've rallied for nearly a week, and it's still sitting at the zero-line for the New York Stock Exchange. Nasdaq is still under it.
Now the next two days will see this oscillator drop some pretty big negative readings, so I expect it to rise, even if the market goes down. But there is a difference -- at least to me -- between when the indicators are given the chance to set up and when they are not. The indicators can improve and start to rise after a rally has started, but if you want to know why this time looks different, then that's my assessment.