Well, the crooks are out
And the streets are gray
You know I wouldn't have it
Any other way
Your mother's words
They're ringing still
But your mother don't
Pay our bills
- Sinister Kid, The Black Keys
Yeah, the Bull’s still intact but this rally’s turned all kinds of bad. I mean the kind of bad that has the emerging markets index under its 10-month moving average yet allows the Russell 2000 small caps to just barely hang onto their trendline going back to March 2009 on a monthly chart.
This Bull may need to be sent to bed without his supper.
All of the major indexes are looking like they want to test the Bull’s long-term support lines going back to that cataclysmic March ’09 bottom. The Nasdaq is almost there now with breakdowns in both Apple and Google exacerbating the non-leadership of the Ciscos and Intels.
This bull’s been bad all spring and its parents are getting concerned. The CBOE put-to-call ratio has been surging as hedge funds scramble for protection. This measure is now at its highest level since January of 2009. Now before you go rushing off into that smirk, consider that kneejerk contrarianism hasn’t been a particularly helpful tactic during the last seven weeks.
Had you been fading the downturn in the AAII sentiment numbers this whole time your wounds would be many and your buying power would be light. We’ve just recorded the ninth consecutive week of below historical average bullish sentiment with a concurrent market mess unlike anything we’ve seen since the Q1 2010 pile-up.
But technically, the bull’s intact. As my friend Derek Hernquist points out, we’ve heard and felt Fear but have thus far not seen and experienced Panic. Fear and Panic are a kitten and a tiger, both can scratch you but only one of them can kill.
So we’ll see if this Bull wants to get back on the straight and narrow. Holding these monthly support lines would be a good first step. But we must now treat him like the juvenile delinquent he is and be sure not to look away for too long.
Nobody wants to spend the summer with a Kick Me sign on their back.