Do you realize that every time the tug of war between the Fear of Missing Out bulls and the Recency Bias bears sees one side pull the other over the line just a bit, the bulls get a tape bomb such as Texas Instruments (TXN) a few days ago or Amazon (AMZN) Thursday evening, just so they can scurry back?
And it's not just the bulls doing the tugging. On Tuesday, we saw the indexes down quite handily in the final hour of trading, as the software stocks were weak most of the day, allowing the bears to tug the bulls over the line, but then we rallied and the tug of war went back to the center.
The one thing that changed on Thursday was that for the first time we saw the S&P 500 rally almost 6 points and breadth was negative. It wasn't negative by that much at minus 230 issues, but negative breadth, if it continues, will change the indicators, so there was a slight change on Thursday.
I also find it interesting that we got overbought this week, and the Overbought/Oversold Oscillator tends to reflect the movement in the Russell 2000 rather closely. Would it surprise you that the Russell 2000 has closed at 1550 three days this week, with one day at 1552? That's the overbought condition hard at work.
We are working the overbought condition off, but so far the Oscillator has not moved enough to fuss.
For example, the S&P is on the verge of making a new high, yes we are still in the range, but there are still fewer than 200 stocks making new highs. That's not a positive to me. At the same time, the number of stocks making new lows has not ratcheted up either and the 10-day moving average of this metric continues to decline for now. That's a positive for me.
When it comes to sentiment the American Association of Investor Intelligence bulls notched up a bit to 35.6%, the same level they were at in mid-September. So they are no longer so bearish, but they aren't complacent or giddy.
The put/call ratio did fall under 80% on Thursday for the first time since Sept. 11, which happens to be the last date the Oscillator got overbought. So that shows a shift in sentiment for the first time. Under 80% is still neutral, but just a few days ago it was over 90%.
Yet the 10-day moving average of this indicator is still heading down. It hasn't even gotten to 90% yet, but you can see it is no longer showing there are too many bears.
In my view, the tug of war with mixed indicators continues.