Is the S&P 500 Weaker Than Current Prices Would Have Us Believe?
I’m watching an increase in the number of new lows, and it’s not suggesting higher prices.
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Last week, everyone was so excited over the new highs in the S&P (and the others). But now we’ve had two relatively mild down days, and the S&P is right where it was on August 5th
August 5th was five trading days after the market bottomed. With the exception of last Thursday’s pop, the S&P has done an awful lot of churning since we had that pop off the lows.
My contention has been that this is not a brand-new leg upward; it is not like the low we saw in late March. The indicators were simply not set up for that. They were in a much different place. And still are.
What is interesting is that the S&P has not seen a lower low (such as under 7700), yet the number of stocks making new lows has increased by a wide margin. The new lows on the NYSE are now at 134. I generally draw a line in the sand at 100 new lows on the NYSE. You need them to contract for the market to be bullish.
It’s hard to see, but back in late July, the new lows soared to 146 (I complained), but a few days later, the S&P was a hundred points lower, and the stocks making new lows had come down to just 92. That is a good setup. What we have now is not.
On the sentiment front, the call buyers did not show up. Here is the ten-day moving average of the ISEE Equity call/put ratio: you can see it ticked right down.
You can see the folks who trade options over on the CBOE were also hesitant to load up on calls. The put/call ratio jumped to .91 which is the highest reading since July 31st. Notice the ten-day moving average of the put/call ratio came down to .80 and has now ticked back up.
In any event, what we saw in the market on Monday was what I have been expecting to happen in August: the others get sold, and the SOX holds up. With the SOX now overbought as well, I’m not sure the semis can keep rocking higher without pulling back first (I do expect dips will get bought there, although, similar to software, I expect the stocks to begin sorting themselves out, with some doing much better than others)
Finally, I am a bit surprised we are not seeing any level of hysteria on bonds. The Daily Sentiment Indicator (DSI) is down to 18. I figure if bonds go down much more and stocks finally begin to care, we’ll see some hysteria about the bonds. Stock folks only care about bonds if they affect stocks. Perhaps that would occur around the same time the DSI (for bonds) gets too low.
