A 2% Down Day and Sentiment Did What?
We discuss what's happened in the past when sentiment was this strong. Plus, QQQ, XOP, CX, CRWD, and META.
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The Market
Well, one thing happened today: folks got much more concerned about the market. I could hear it in their voices. But we also saw it in the put/call ratio, which skipped right up over 1.0 for the first time since May 30th.
The McClellan Summation Index did turn down, so it has joined the Nasdaq Summation Index which turned down two days ago. And we finally got that two percent down day that everyone has been waiting for. I do think the market will have a rally attempt tomorrow since that is typically what happens after a two percent down day, although we did not get any panic. The down volume was 77%.
The QQQs saw a rise –nothing extreme but a rise—in volume.
Away from that, the Utes made a new 52-week high. I am still a fan but another day or two and they will be short term overbought again.
But I want to get away from the short term wiggles for a minute. As you know the Citi Panic/Euphoria Model has been in Euphoria for months. The AAII Bulls got over 50% last week (I expect they will fall a good amount this week). The Market Vane Bulls are at 73% as well.
Today we got the Investors Intelligence bulls at 64.2% which is really high. It is the highest since December 2020 (recall the market peaked in January 2021). The Bears fell too and they are now down to 14.9%. However it is the ratio of bulls to bears that is worth discussing.
This ratio is back to 4.31. It was in this area in March/April just prior to the big whack in the market. You can see the chart: the ratio doesn’t get up here very often. When it does the market tends to correct to bring sentiment back inline.
Considering the moves in the mega cap tech stocks I suspect we will see all of these sentiment indicators begin to fall (see the put/call ratio above) but that takes time and with none of the intermediate term indicators oversold rallies are not likely to last very long.
Note: I joined a webinar for a quarterly review of the markets yesterday. The link is here:
New Ideas
Should the QQQs bounce? They should. But recall they bounced Monday and then came down again. If you want to play for a bounce, take profits quickly and treat it like a trade.
Update on the DSI for Copper: it is now 14.
Today’s Indicator
The Volume Indicator has surprised me. It should be higher by now and it is not. I expected it would be over 55% by now. I hope it doesn’t just go sideways into its overbought condition.
Q&A/Reader’s Feedback
This 140 area is a big level for XOP. It can bounce from there but with the market not oversold I don’t think we can get more than a bounce right now. If it is still holding 140 when we get oversold then I’d be a buyer.
Cemex CX has a measured target near 6 and has support down there as well. Again, if it is still holding that area when we get oversold I’d be happy to take a stab so I’d like to see if it can hold.
CrowdStrike CRWD has a lot of work to do before I think it can launch anything more than a short term rally. If it managed a short term rally I’d be a seller around 290-300.
Meta’s META earnings are next week and I don’t like to get in front of earnings. For now it is holding 460 but if the stock got down near 400 either before or after earnings I would buy it for a trade.
