Monday gave us a lot of "bear market rally" chatter. On Tuesday that chatter morphed back to "tradeable bottom." This suggests that if the market is down on Wednesday, we'll probably hear "bear market rally" again.
You know the one thing I didn't hear all day on Tuesday? Calls for capitulation. The S&P 500 has now rallied about 6% since Thursday afternoon. The farther away from the low we get, the less likely we are to hear that word bantered about. As I was reminded on Tuesday, everyone wants a 10% correction, until we have a 10% correction -- and then we get a laundry list of why we shouldn't buy.
Sentiment rarely changes. We are human after all. Most folks get bullish as prices rise and bearish as they fall. We simply cannot help ourselves.
So has sentiment really shifted that much since last Thursday? Ever so slightly. For example, the put/call ratio for exchange-traded funds was under 1.0 for the first time since late January. That says something. It tells me folks are finally leaning a smidgen more bullishly. But just a smidge. The moving average lines are only just now turning down.
The biggest change -- aside from sentiment -- in the market this week is that the McClellan Summation Index curled upward. You will need a magnifying glass to see it, but it did curl under for the first time since early April.
I have no idea if last week was the low. It might be. It might not be. The same way I said I won't know we've seen the high until after the fact, I won't know about the low until after the fact. What I do know is that we have likely seen the peak reading for stocks making new lows. Nasdaq has still not surpassed the January reading. On Tuesday Nasdaq had the fewest new lows in nearly six weeks.
This means the Hi-Lo Indicator is still single digits. I can't even show you the turn, because it is smaller than the turn up in the Summation Index. However, what I know from experience is that when it does turn, it tends to move fast and based on the math it ought to turn up this week.
I want to close with a word about resistance. There is plenty of it overhead. Everyone can see on the S&P it starts around 4150 (blue line), but I would like to remind you that in the March rally, the S&P made a marginal higher high (arrow) and all it did was suck everyone in.
I will always pay more attention to the indicators than I will the price on the chart, because I find the indicators are a better guide. That doesn't mean resistance and support don't matter, it's just that it can be something everyone sees so clearly and therefore can fool the majority at times, myself included. Just think of all those folks who called for 3800 on the S&P only to be "short changed," when it only got to 3850.
Let's see if the S&P can get to resistance (my call is it gets there) and what the indicators look like if that happens.