Have you noticed that CNBC has stopped asking their guests when they think the correction is coming? I suppose that's what a 4% slide in the S&P 500 will do.
In fact, to show you how fast sentiment has changed, the Investors Intelligence readings show bulls at 46.4%, the lowest reading since February (when the market made a low). You might recall how I fussed in June and July, when we saw the bulls in this poll reached over 60%. I indicated there had been no time in the last 25 years that a reading over 60% had not resulted in at least a 3% correction. We certainly got that correction.
Typically, in the last few years it has taken a reading under 45% bulls to produce an end to a correction in the market. But the pulling in of the horns from just over 55% bulls three weeks ago is rather dramatic and shows the sentiment shift.
I would note the curiosity is that the bears are still at 16.2%. It seems everyone has simply jumped into the correction camp!
Away from that, since I covered the chart of the Bank Index yesterday I was asked if I thought perhaps the head and shoulders top in the SPDR S&P Regional Banking ETF (KRE) was a "better" head and shoulders top, since the right shoulder was only a modest higher high and the neckline is flat, not up-slanting.
While I have been looking at the top in KRE for some time, I suppose it hadn't struck me until today that it looks as if it came right out of a textbook. Take a look, and check CC for more on this:
I grant you that KRE would have to break under $36.50 -- and do so substantially -- to complete the top, but it definitely caught my eye.
In the past few years, tops such as this have gotten saved every time they have come close to breaking. Or they have broken in an unconvincing way, so as to make the break meaningless. That's why I do think this chart bears watching.
The good news in the chart is that it hasn't broken to a lower low in over a week. The bad news is that it hasn't participated in the oversold rally. Should it break, and it continues to follow the textbook pattern, there would then be a throwback rally to the neckline, followed by a measured target near $32, which is about 15% from where it is now.
I would note that if this chart does break, I do not think the S&P can withstand such a break; it would likely pull the index down with it. For now though, it remains my view that we complete this current oversold rally and come back down again.
At the time of publication, Helene Meisler had no positions in any of the securities mentioned.