Nasdaq Headed Back To Oversold Territory

I clearly did not see Tuesday coming. I thought we'd give back some, maybe half the gains from Monday and that would be that. I did not think we'd collapse as we did. And yet, as much as I complained about Monday's rally, the statistics for Tuesday's decline were not that awful.

Let's begin with the oversold condition. You can see on the charts of the Oscillators that they remain in oversold territory. However since Nasdaq saw the bulk of the selling I went back to the drawing board on the Nasdaq Momentum Indicator to plug in lower closes for Nasdaq for the next week. And while I grant you I did not plug in triple digit declines you can see that it still goes up on Thursday of this week. This makes it oversold.

After Monday's rally I complained about the number of stocks making new lows increasing on such a big up day. Tuesday's decline saw the number of stocks contracting once again. Even on Nasdaq where we saw the brunt of the selling, Monday's new-lows number was 100 while Tuesday's was 90.

This brings us to the Hi-Lo Indicator. Remember that when this pushes under15% it is oversold. It is currently at 21% so it should get under 15% this coming week. Let me note Nasdaq's is still at 49% so it is a far way off.

Then there is sentiment. The put/call ratio was not terribly high the way it has been, probably because there was more selling of individual stocks than protecting of profits. The total put/call ratio was 107%. However the last five trading days have seen very high readings which has caused the 10-day moving average of this indicator to rocket upward. It's still too early for me to see when it might turn down (up is bearish, down is bullish) but it is getting to an extreme reading.

Elsewhere there was something else in terms of sentiment. For the first time there was a real flight to safety-into the bonds. Since early February I have been of the mind that bonds were done going down (yields done going up), at least for now. I have suffered waiting for yields to roll over. Tuesday the yield on the 10-year note finally rolled under 2.80%. It's only at 2.78% but that's a change.

The top measures to 2.65-2.70-ish but for now that blue line around 2.75% would be a first target should the yield remain under 2.85%

I still think we're oversold enough to have another rally but I don't much like it when we use up an oversold condition like this.

Finally despite my call for higher volatility-which we got when the market fell---the VIX has refused to get jumpy. Will it only get jumpy if we break the 200 day moving average line on the S&P 500?