On Monday, Sellers Walked Away Midday

Let me begin by addressing the Overbought/Oversold Oscillator because the question I got most frequently these last few days was if the 493 are oversold but the 7 are overbought.

First of all, I think we need a new moniker for these stocks, so I’ll go back to the Either/Or Market. When the mega cap and semi stocks sit it out, everything else has room to rally. That has not changed.

The Oscillator looks oversold, but the math says more choppy than oversold for the Others. On the chart, I have boxed in red another period of time where the Oscillator looked oversold but spent more time doing a cha cha than anything else. The S&P hovered back and forth over 6700 during that period.

As for Monday’s action, for the second straight day, we saw the selling in the banks dry up. On Friday, the Bank Index did not make a lower low (vs earlier in the week), and on Monday, there was actually some buying. That leads to a group that had been seeing a lot of selling for nearly a month to start holding. Do I trust the banks to rally much from here? I don’t. I think at best we’re looking at a rally to those downtrend lines.

Mostly, even if we look at the hot tech stocks that sold off these last few days, the selling seems large, but even if you look at Intel (INTC), which has now had four red days in a row, you can see overall it looks (for now) like a standard pullback. But also, it was barely able to crack under Friday’s low. The selling might have started right after the open, but it didn’t last very long.

Days like Monday don’t change the indicators, which are still intermediate-term overbought. Days like Monday don’t change sentiment either. For example, bonds saw no follow-through to the downside, so the DSI stayed at 22. Thus, we made no progress toward an extreme sentiment reading there. And if bonds bounce in the coming days, the sentiment will have to reset again.

Here’s what I would highlight, though. The Transports, despite the move in oil, have been green for three straight days. The Utes, despite the move in interest rates, saw no follow-on selling on Monday. Even Nasdaq, where supposedly all the selling was, saw up/down volume at 50%.

The Nasdaq McClellan Summation Index has rolled over enough for you to see it.

The number of stocks making new lows on Nasdaq did not contract, but I’ll call the three more new lows we saw than last week an equal. Another way you can see how the selling dried up on Monday midday.

The market still seems pretty complacent to me.