What Caught My Eye Today? How Cautious Folks Were on Today’s Rally.
I’ve been expecting a little oversold rally, but not with this level of concern.
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The Market
Sure, I thought we’d rally today (and maybe even tomorrow) before we turn back down, but two things occurred today that caught my eye.
We already know Nasdaq is oversold or close to it (depending on which indicator we use). We’re in the neighborhood. And we know the breadth of the market was pretty ho-hum today, which is unusual when the Russell 2000 is up over one percent. So in that respect, not much changed. The Either/Or market had the others sloppy.
Perhaps it was the poor breadth coupled with the rally in the indexes that got folks (mostly retail) interested in buying puts, but the ISE call/put ratio sunk like a stone today. It chimed in under 1.0 (more puts than calls) for the first time since April 8th, which was one week after the low in the market. That is actually bullish stocks.
But then I saw the ISE Equity call/put ratio chime in at 1.24 (this rarely gets under 1.0) and discovered the last time we had a reading this low was August 2024, which was a low in the market.
In other words, I did not expect folks to be cautious/bearish on a rally. I said last week I thought we’d rally early this week, and it would get folks bulled up. That was wrong because using this metric, folks are buying puts, not calls. I do not tend to use the incredibly short-term 5-day moving average much, but here you can see the massive decline in this indicator and how that 1.60 area has tended to be a low in the market. My view has been that Nasdaq would be like where that green arrow is (bounce and back down).
The other thing I noticed today is much more anecdotal. Since late June, I have been harping away about this 7500 area on the S&P and how we have gone nowhere since mid-May. All of a sudden, in the last two days, the number of folks pointing this out has become deafening.
In my experience, when everyone sees something, it’s about to change.
Again, my view has been bounce early this week and back down again. We’re already oversold, but I wanted some fear to go along with it. I wanted the VIX to get jumpy. But I did not expect sentiment among retail options traders to get so bearish.
I still like my scenario, but I have to keep an open mind that at least in terms of tech stocks/semis, that’s not going to come to fruition.
New Ideas
We finally got the move in Coinbase (COIN) that I recommended a few weeks ago. It hasn’t crossed the downtrend line. It also has a tendency to rally and die, so I’m using a stop under today’s low.
We also finally got a move in GLD (recommended just prior to my vacation when the DSI got to 10. It hasn’t done much, but my mantra has been ‘in the 360 area, I am a buyer’. So now I want to make 360 my stop. I would like to see it get over 380, the recent high, and the downtrend line.
Today’s Indicator
The McClellan Summation Index is still heading down.
Q&A/Reader’s Feedback
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Xeris (XERS) still has not filled that gap at 9.75. If it can’t do it in the next day or two, then I think it is coming down to test that line.
The best thing I can say about CRH (CRH) is it is oversold and at support, so if it breaks 98, you know you are wrong. In that respect, I suppose the risk/reward isn’t bad, but lately these types of charts have languished.
Comfort Systems (FIX) has earnings on Thursday, so take whatever I write here with an entire shaker of salt. I view playing earnings as gambling. That having been said, it’s a similar pattern to many of the tech/semi stocks we’ve looked at recently. The spike low from last week (ought to hold on a downdraft, call it 15-1600), but failure to get up and over that 1800 area (those three highs from the last two weeks) in the next day or so tells me a test of that spike low/support line is in play.
I want to like Palantir (PLTR) because it’s a good trading stock, but if it can’t get over 140 before earnings (early August), then I’d fret.
