Will the market change its pattern? You know the pattern that I'm talking about: The one where we are not entitled to more than one up day in a row? I'm going to skip right to the part where I tell you the contrarian in me would love to see one, because it's so expected that we'll be down on Wednesday. But at the same time I don't know if that's just wishful thinking.
What I do know is that if we do get it, we should finally be able to start some sort of bottoming process, starting with a rally. The intermediate-term indicators are not all oversold, but many of them are. For example, the Hi-Lo Indicator has been alternating between zero and one for days now. That makes it oversold.
The McClellan Summation Index, which has been heading down since mid-January, which is just over two months ago, now needs a net differential of positive 100 advancers minus decliners on the New York Stock Exchange to halt the decline. Anything more and it turns up.
Consider that after last week's rally on Thursday, this indicator still required positive 2,800. After last Tuesday's up day, it needed positive 3,800, which was the same number required after that big surge on the prior Friday. So you can see this rally has a different set up using this intermediate-term indicator.
One other point is that most of the rally days have seen me complain about breadth, something I will not do now, because it was a very good day for breadth. It was also the first rally since the decline began that saw 90% of the volume on the upside.
Sticking with the intermediate-term indicators, the Volume Indicator got down to 38% this week. That, too, is oversold. In October 2008 it got to 39%. In July of 2002, it got as low as 36% and post 9/11 it got to 37%.
One sentiment indicator that has also finally moved is the 30 day moving average of the equity put/call ratio. For weeks it had refused to even match the peak in December 2018 and now it has surpassed it. It might still go higher but at least it has finally pushed into an extreme territory.
The 30-day moving average of the advance/decline line is still not maximum oversold. I can make the case that it gets oversold on Thursday, but I can make a better case that it gets oversold on April 1 or 2.
I want to make two points here. I still think we're oversold enough to get a rally, or I should say more of a rally. But also that these indicators almost always double tap as you can see. They rarely mark the low but rather there are months of bottoming thereafter. The intermediate term indicators need to lift and come back down, or at least that is the process that I look for.