As we come to the end of the quarter, I like to look back and see where the S&P closed the prior quarter. I am not one who fusses too much over whether we had an up or a down quarter, but I do find it of interest. And this quarter is quite interesting, because the second quarter closed at 3785 on the S&P 500.
It has been a wild quarter, with big up moves in July and early August and big down moves in late August and most of September. Some might call that ... volatility. I have discussed this before, using the late 2001 to early 2002 time frame as a general guide when we swung back and forth for months.
It is my view that markets rarely come down in a straight line. Yes, a lot has to do with the economy or the Fed or whatever, but markets take time to figure out what's going on. Are things getting better? Are things getting worse? That is how I view this period of back and forth. And I do believe eventually the indicators will line up enough to tell us if the break will be down or up from the range.
The reason I find it so interesting that the second quarter closed at 3785 is because we currently stand at 3719 with a mere two days to go until the end of the quarter, so if we don't give back Wednesday's gains and if we even rally a bit more, we could have a quarter that is pretty close to flat. Imagine if someone had told you at any point prior to the last few months or even days that we had the chance to be flat on the quarter, you might have scoffed.
In any event we did get an oversold rally. And regardless of what transpires into the end of the quarter I think we should rally some more. As you can see from the Oscillator we've got some room until we get overbought.
Sticking with the oversold theme the Volume Indicator came down to just under 39% this week, the lowest since March 2020. This ought to support my call for an oversold rally.
Then there is sentiment, how fast folks turn to the bullish side. I noted last week that I expect sometime in early October we'd see the bears get up off their lounge chairs and mosey over to the bulls' fence and I still think that is the case.
While the Investors Intelligence survey this week does not include Wednesday's rally, you can see that last week saw the bulls drop to 25.4%, about one point lower than the June reading of 26%. They were at 45% in mid-August.
While the bears are only at 34% (they were at 44% in June) that is up from 26% in mid-August. It will take time to turn this sentiment and generally speaking that requires a rally to last longer than a day.