Well, yesterday certainly got 'em bullish again. For the past week or so, we've had an interesting occurrence in the options trading area.
On days where we've had the CBOE's equity put/call ratio in the 50s or 60s (too many bulls), we've had the ISE call/put ratio in the 90s (not enough bulls). On days where we've had the ISE equity call/put ratio up over 200% (too many bulls), we've had the CBOE's total put/call ratio over 100%. They have not said the same thing on the same day.
But that changed yesterday. Yesterday, the CBOE's equity put/call ratio moved down to 60%, the total put/call ratio was 89% and the ISE's equity call put ratio was190%, coupled with its total call/put ratio at 133%.
Before your eyes glaze over, that tells us that it's no longer choppy -- they are now all bullish.
The Index put/call ratio's 21-day moving average (on the CBOE) is still heading upward, which is generally not bullish.
The American Association of Individual Investors' weekly survey showed bulls over 50% for the second week in a row. That hasn't occurred since the October highs.
Then we have dollar/yen. I won't harp on this anymore, as I'm sure everyone knows where I stand: If it heads down, the market usually does as well.
Several weeks ago and again last week, I showed the chart of the yield on the 30-year bond. Each time it got up to the trend line and headed down, so did the stock market.
The three lows equate to November low, the January low and the March low. The highs are represented by points A, B and C. Point A was late December. Point B was February. Point C is current.
As a reminder, we made a high in the S&P in late December. We made a high in February, and we are at a high now. I use the question mark on the chart because it hasn't occurred yet -- and I grant the bulls, it may not -- but so far, it's been the trade that's worked.
We are still not yet oversold. The 30-day moving average of the advance/decline line is also still overbought. And breadth has been relatively poor. We can now add to this list the fact that the number of stocks making new lows has started to creep up again. Nothing urgent yet, but the direction is once again up, while new highs are contracting.
I showed the NYSE and Nasdaq volume relationship yesterday and explained that for it to work well, we needed the McClellan Summation Index for Nasdaq to roll over. Yesterday saved the Summation Index from rolling over. However, it didn't save it by that much. A down day that gives us a net negative differential of -300 million shares on Nasdaq will start this indicator on the downward path.
I have been in the correction camp, and I remain there. I don't like the indicators rolling over, and I don't like the complacency that has crept in.
Overbought/Oversold Oscillators
For more explanation of these indicators, check out The Chartist's primer.
Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.
