One thing I have noticed from Wall Street in the last few days is how less bullish they have become. And I don't mean traders. I mean the investment, macro and strategist types.
I don't mean to say they have become bearish, but the sense I get is their enthusiasm for the market has waned quite a bit in the last 10 to 14 days. If I had to place the exact time sentiment began to shift, ever so slightly, and this is anecdotal, it was early last week, you can see it on the chart of the Russel 2000 fund (IWM) , when we had that gap down under $225.
I've begun to hear comments like "stocks are ahead of themselves." Or "we need a breather." These are comments we didn't hear prior to that decline. Prior to the decline we seemingly had a bunch of folks with S&P targets well over 4,000. I don't know where they have gone. We have not yet seen it in any of the sentiment indicators except that the equity put/call ratio has been rising ever so quietly whereas the 10-day moving average of this metric has crept up over the early March high and is the highest in 2021.
As we know when sentiment becomes too bearish I consider that a good thing for market. It is far from too bearish now but the anecdotal comments and the creeping up of the ten day moving average of the equity put/call ratio tell me it's shifting. We'll see if we get any confirmation in this week's surveys.
I continue to be concerned about the Daily Sentiment Index (DSI) for the Volatility Index, because it is back down to 13. The VIX may have closed just under 20, but that DSI reading says we shouldn't expect it to stay down there very long. It is possible folks are a bit concerned about this week's Friday trading where the bonds are open and stocks are not and we get an employment number. As I said earlier in the week, if we head into Friday with a low DSI for the VIX, I will have no choice but to look for a rise in volatility out of that trading day.
Away from that, breadth was rather decent on Tuesday, but it hasn't changed any of the indicators. For example, the S&P is still at the highs and the McClellan Summation Index is at a four-month low. Keep in mind this is what the average stock is doing.
The only good news I can offer from this indicator is that it would now require a net differential of positive 700 advancers minus decliners on the New York Stock Exchange to stop the decline (more to turn it back up).
For now, we are in the midst of the big chop in an either/or market. Something needs to shake it up.
Finally, I was interviewed by Stockcharts TV. We taped it several weeks ago; it is not on the current market, but a look back on my career. If you would like to watch it, here it is: https://www.youtube.com/watch?v=IP4uElZ7b4Y