Was it just last Thursday -- less than a week ago -- that the hate for oil was so great? Was it just last Thursday that the folks who months ago thought $200 oil was in the cards changed their minds and decided $50 was more like it? It was.
And here we are a few days later and lo and behold, folks are warming up to energy again. Maybe it's because the exchange-traded fund (XLE) for energy has rallied about 8% in the last week. But I suppose a change in sentiment is what happens when folks decide to reverse the pattern of the prior six weeks.
The Bank Index too has seen quite a move in June, up around 10%. Banks and energy were the two groups I had thought would rally starting in mid-May so I am pleased they finally got going this week.
But there is another aspect to all of this. Sentiment. Recall my view has been that it was as if we were living in two different markets. Technology had a love-fest and giddiness going on. Folks were partying there like it was 1999. And then there was everything else, represented by the "Panic" in the Citi Panic/Euphoria Model.
It is my view that as the down and outs rally the negative sentiment toward them should abate. It should lift, it should gradually become more bullish. It is also my view that as long as technology stocks don't collapse folks will remain bullish on them. That means the two versions of sentiment should converge, or at least close that gap as the bears from the down and outs become more bullish.
I know it is anecdotal but as tech got clipped pretty good on Wednesday I sensed very little change in sentiment toward them. Recall the other day I noted sentiment toward tech was consensus that it was awesome or needed a rest before it went higher. So I believe folks think the decline on Wednesday was the rest period. It may be, but I think that is part of the sentiment, and how folks don't get too concerned too quickly about tech.
The Investors Intelligence bulls ticked up to 51.3% and the bears moved down to 21.6%. That is the highest readings for bulls and the lowest for bears since the fall of 2021. Neither is extreme-yet-but you can imagine how if the small caps don't fall apart in the next week this could get over 55% in the next week or so and then we'd be looking at too many bulls. Especially if the bears become teenagers.
In the meantime the improvement in the number of stocks making new highs continues. I hope you can see the difference, when breadth is good there is more to choose from on the upside; when it is poor, there is not and everyone piles into the handful of stocks that are going up. I prefer when breadth is good.
Let me end by noting that the Russell 2000 using IWM is up against its first resistance since getting over 1800 (180 on IWM). It's been a big week for them so I wouldn't be surprised if they had a day off.
