Disney's Expedition Everest Is Wild, But It's Got Nothing on This Market
Disney (DIS) hasn't yet reopened in the U.S., but the roller coaster ride we call the market is open for business. And the roller coaster ride continues.
I noted last week that we have not managed to have more than two red days in a row since early March for the S&P. Do you know we have not managed to have more than three green days in a row for the S&P since February? That's the up/down/up/down action I keep seeing in the statistics and indicators.
If we could get a long string of red days it would set up a good oversold condition. If we could get a long string of green days it would set up a good overbought condition. But we can't get either and so we get these short term moves.
Let's begin with the reversal. It arrived right after the Invesco QQQ (QQQ) managed to fill that gap from early March, so in that respect the chart worked just fine. What is different in this week's sell-off vs. last week's sell-off is the volume. Last week we saw volume rise decently into the decline, where as this week, we haven't seen it yet. Last week it gave us a set up for a rally.
The other indicator that gave us a set up for the recent three-day rally was the high put/call ratio for that decline. That, too, is different this week. Monday's total put/call ratio was 72%. So was Tuesday's. That means the 10-day moving average is veering into complacency land.
In addition to the total put/call ratio readings, Monday's equity put/call ratio was 47%, the lowest reading since February. The put/call ratio for exchange-traded funds was also under 100% for the first time since February. These readings are quite different than last week's when all these readings soared to where they were in March near the lows.
There was something else that was different. The breadth of the market for the day was relatively calm for a day the S&P lost 30 points. It hasn't changed the lower highs in the cumulative advance/decline line that we looked at Monday, nor has it changed the McClellan Summation Index, but it is worth pointing out that it wasn't weak breadth that preceded the decline on Tuesday.
I think these are all reasons why we should continue to see volatility the roller coaster ride isn't going away.
One final note on silver, since it has been so hot in recent days. Using SLV (SLV) , the ETF to trade it, silver got to resistance on Tuesday and the Daily Sentiment Index (DSI) got to 91. I would not be surprised to see a pullback later this week.
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At the time of publication, Meisler had no position in the securities mentioned.