Remember that S&P 500 chart from two days ago? You know, the one with the 50- day moving average overhead? As you can see, the action in the market the last two days hasn't changed a thing on the chart.
The moving average still looms overhead around 2950, as do the prior highs from the rallies post Aug. 5. Perhaps that's why folks are so bearish.
I know, the chatter seems to be happier and more accepting of the rally, but when I see the put/call ratio at 128% on a day like Wednesday, I take notice.
You see, 128% is the highest reading we've seen since the August correction began. We came close on other days, but Wednesday, with the S&P 500 up almost 25 points, was the highest. What's more, the put/call ratio for exchange-traded funds was 254%. That's even higher than the only other reading we saw over 200% on Aug. 5. In fact, we have to go all the way back to May 29 to see folks hedging so much.
I know someone will ask me how unusual is it for us to see such high options ratios on an up day, and I have a hard time recalling another instance, so let's just say it is rather unusual.
Most of the other indicators are pretty much where they have been for the last few days. The 10-day moving average of the stocks making new lows continues to decline. The 10-day moving average of the put/call ratio continues to decline. The McClellan Summation Index is still struggling to curl back up as well.
The Volume Indicator did, however, reach an oversold condition last week when it tagged 44%. It is now 46%, so it is still pretty much still oversold.
The breadth of the market has been quite good. Take a close look at the cumulative advance/decline line and you can see it has moved up and over the equivalent of that 2950 area of the S&P as it is now closing in on the all time high from late July.
It is doing so, while the S&P still languishes below that first rebound, I'd call this a positive divergence.
As for the Overbought/Oversold Oscillator, it has finally moved up. If we can get a few more up days, then I expect it will be back to an overbought condition midweek next week.
I suspect if the S&P can clear over what by now must be such obvious resistance (my mother has probably heard about it from the guy on the radio by now!), at 2950 my guess is sentiment will shift from all this hedging and cautiousness to outright optimism. And should that happen just as we get overbought, that would be typical, wouldn't it?