The Clowns Think the Market Can’t Correct. Is the Joke on Them?
The clowns are still present but there are a handful fewer out there after a day like Thursday. I suspect if we don’t bounce on Friday we’ll see all these recent more bullish surveys show a decline in bulls next week.
For example, the AAII bulls jumped up to 47%. So, unless NVIDIA can drag the rest of the market back up with it those folks will likely scurry back over the fence next week.
Or the NAAIM folks who lifted their exposure this week to 94 will probably pare some back by next week.
And maybe we’ll see folks start buying puts again and we’ll see the ten day moving average of the put/call ratio lift. I was a bit surprised that the reading was only .90 on Thursday. For weeks on end we could not drop this ratio under .90 and now it’s as if we can’t get it back over it.
The number of stocks making new lows continues to expand. The NYSE had the highest number since mid April while Nasdaq’s reading was the highest since late April. The ten day moving average of new lows on Nasdaq was just trying to turn up a few days ago when we last checked in on this chart. Now you do not need the magnifying glass for it.
Nor do you need a magnifying glass to see the rolling over in the McClellan Summation Index. Well, okay maybe you still need one, but it has in fact turned down.
I am certain many of you will look at the plunge in the Overbought/Oversold Oscillator and say it is now oversold. I do wish that was the case but it is not. I would call it a tiny bit oversold—enough for a bounce. But the math behind it does not support a true oversold condition.
Now let’s check in on some charts. The Russell 2000 really took it on the chin. It now finds itself right at a decent short term uptrend line. There is a little gap below that fills around 200. So do we break the line to fill the gap or do we just rally from here? I think we bounce and then come back down.
We already know about the Transports. They are closing in on prior support, having basically done a roundtrip from the April low. It’s easy to see a bounce when its your first visit to support. The second time down, or the third, it is not as easy. I do think that since the Transports are already down five percent in the last week or two they will be quite oversold if they get to 14750. My concern though is that the bounce we get will be pathetic and won’t go very far.
Then we have the Utes. You know, that group everyone fell in love with a few weeks ago. They were down over two percent on Thursday. That must be why we didn’t hear anything about them. 900 is obvious support but know that they had their worst day since early October. I am still not interested in buying Utes here; I continue to lean toward taking some profits.
Finally, I was quite surprised to see IGV could not make it over the line on Thursday. I still believe this group is the key to the semis. A failure to make a higher high would not bode well for the semis about a month out in time.
