Sometimes we have to give the markets time to play out. Just look at what happened back on March 21 when the Nasdaq's Daily Sentiment Index (DSI) tagged 95. The very next day, the Nasdaq rewarded us with a nearly 200-point decline. As market players, we're like teenagers who love instant gratification, and this was a perfect example of our impulses.
But look at what happened after March 22, the day when bonds' DSI jumped up to 93. Unlike the example above, bonds barely budged the next trading day.
And fast-forward again to last Wednesday, March 27. Bonds' DSI jumped once more -- this time to 92 -- but there was no instant gratification. The bond market made us exercise patience this time, something we as market players don't take kindly to.
But on Monday, the market finally rewarded our patience as bond yields jumped (although there's some heavy resistance on the five-year Treasury note as it pushes toward 2.40%):
I point this out because the DSI fell to 73 on Monday. As a reminder, this is a daily indicator, so it does tend to move around quite a bit. But I'm certain you probably heard it all around you -- folks who were screaming "Recession!" last week are now calling for rates to rise.
As for stocks, breadth was good on Monday, and that helped the McClellan Summation Index turn higher for the first time since Feb. 22. The number of New York Stock Exchange names making new highs rose to 178 -- an increase over the previous peak reading of 169, which is good. But let's remember that we're now just a few percentage points from the market's all-time high, and there were well over 500 stocks making new highs last time the S&P 500 was up here.
But the real issue to me is the Nasdaq. The number of stocks making new highs there continues to contract despite the index climbing ever higher:
Still, I'm pleased that the Dow Transports have had a 6% rally off the 10,000 support level (as indicated by the black in below):
Of course, I'm not terribly pleased that all of a sudden everyone has discovered they like the transports after a 6% rally to resistance. So, the transports probably need a few days of rest here.
And then there's sentiment, which is all over the map. The put/call ratio for exchange traded funds has been below 100% for four of the last five trading days. This shows giddiness, but at some point that becomes bearish for stocks.
The flip side is that the CBOE Volatility Index's put/call ratiois back under 20%, the fourth time that's happened in a week. Last week that was bullish, but it makes me wonder why we're seeing such persistence from this particular group of options traders.
And then consider the Nasdaq's DSI, which has pushed back above 90 to hit 91. The S&P 500's DSI has hit 86, and if it goes over 90 this week, I'd side with the thought that ETF-call buyers are wrong and the VIX-call buyers are right in the near term.
Lastly, here are the overbought/oversold oscillators:
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