The down-and-outers came alive!
And, yes, that makes me happy. What I find more interesting is that so few feel the urge to embrace them. Instead, we hear a lot more chatter about how crummy the economic numbers are, so we shouldn’t trust it.
Statistically, speaking breadth was terrific — finally. It was enough to get the McClellan Summation Index to stop going down. It has been going down for six weeks now, so that’s a change. The bad news? If the market turns south again Thursday, it is entirely possible the Summation Index gives up the help it got Wednesday.
So, why should the market turn south? Well, perhaps not south immediately, but we are back to a sentiment issue. The Daily Sentiment Index (DSI) is now 89 for both Nasdaq and the S&P, so if we get one more up day, these will scoot over 90 and you saw what happened Monday when we get readings over 90.
Then there is the put/call ratio, which chimed in today at 62%. This is the lowest reading since June 8, which turned out to be the peak in June for most stocks. I suppose the good news is that there were two days with such low readings before it mattered, so perhaps we get one or two more.
Finally, the Investor’s Intelligence bulls are now 58.1%. The peak reading so far for this year was 59.4% in January, so we’re getting closer. As a reminder readings over 60% are big red flags for me. Over 55% and it’s a yellow flag.
Anyway, the takeaway is that there was improvement in that the down-and-outers finally rallied and they outperformed growth in a meaningful way. Sentiment, however, remains elevated.
It’s getting harder to find stocks that are down and out now that they have moved. I also don’t like to get in front of earnings, so I’m looking at Citigroup (C) - Get Free Report. If it holds that $50 area it should improve.
The Volume Indicator remains overbought at 54%.
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SailPoint Technologies (SAIL) - Get Free Report has a measured target in the mid $30s, but it is not my kind of chart. It is up too much and hasn’t had a correction in months, so in my view it is vulnerable to one. If it pulled back to the breakout around $24-$25, I might get interested.