Knocking on Giddy's Door
The SOX is overbought. Meanwhile, is the VIX perking up?
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Is there anyone out there who doesn’t have a chart to show you how overbought the semis are? Is there anyone who doesn’t know the RSI for the SOX is high? Is there anyone who can’t quote for you what percentage over the 200-day moving average the SOX is?
And heck, if you are looking for a sign, Micron closed at 666. It missed closing at 666.66 by seven cents!
On a serious note, we all know that anything that rallies 50%+ in a matter of weeks is overbought. I don’t even use RSI (Relative Strength), and yet I know that anything that rallies 50%+ in a matter of weeks surely has a high RSI. You would, however, stop me when it comes to the percent over the 200-day moving average line. I’d have to take out my pencil to figure that out.
All of this is to say, who doesn’t know any of this? But more so, who wasn’t citing statistics like this a week ago? The semis are in a world of their own. They have become ‘the’ market. I noted yesterday that I would watch the Daily Sentiment Index (DSI) for Nasdaq, since there is not one for the SOX specifically, for a sign sentiment had gone too far.
On Wednesday the DSI for Nasdaq chimed in at 84. I call that knocking on the door to giddy. Over 85 and I consider it a yellow light. Over 90 and it’s a red light. So, if the SOX keeps on going, I have no doubt the DSI will push right over 85 for Nasdaq.
But there was something else from Wednesday’s trading in terms of sentiment. The put/call ratio (total) chimed in at .63. That is the lowest in more than five years. The last time it was this low was late January 2021. As a reminder that was in the height of SPAC-mania and the Roaring Kitty nonsense.
To add to that, the ISE equity call/put ratio was 2.89. My line in the sand there has typically been 3.0. When this gets over 3.0, we are truly giddy (that’s 3 calls for every put). The last time we saw that was a reading of 3.05 in mid to late January.
Yesterday I spent a good deal of time discussing the VIX. Did you notice that the VIX closed green on Wednesday? Those low VIX put/call ratios –two in one week—should not be ignored.
You know what else was odd about Wednesday? Citigroup was green all day but closed red. Some will think I am cherry picking, but it stood out like a sore thumb to me, especially since the Bank Index still hasn’t made a higher high. Heck, it’s still not over its mid-April high.
My intermediate-term indicators are still set to get overbought next week. If this market keeps going up and the DSI gets over 85 (and the VIX’s DSI, which is currently 23, slips to the teens) as we get overbought, I would think the market ought to correct from these lofty levels.
At the very least, I expect that VIX to get frisky.
