The S&P 500 Index is down 2.2% from its late May high, up 1.2% year to date, and yet, up 9.1% over the last year and investors are becoming more concerned about an imminent correction in the stock market. The concern is certainly understandable given the fact the market is nearing four years since the last 10+% correction. This concern has translated into and equity put/call ratio that continues to rise towards levels indicative of an oversold market. An oversold market and only down 2.2%? The below chart shows the CBOE Equity P/C ratio closed at .82 today. Levels above 1.0 are most predictive of overly bearish sentiment and where markets have the propensity to rally.
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| From The Blog of HORAN Capital Advisors |
Some market technicians prefer to look at the 21-day moving average of the equity put/call ratio to determine market sentiment. By this measure the ratio also is nearing a level indicative of an oversold market.
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| From The Blog of HORAN Capital Advisors |
Lastly, today's report on individual investor sentiment from the American Association of Individual Investor shows bullish investor sentiment remains at a very low level, 24.32%. Today's sentiment reading remains more than one standard deviation below the average bullish sentiment level of 39%.
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| From The Blog of HORAN Capital Advisors |
With all this negative sentiment as an undercurrent in the current market action this year, odds seem to favor, at worse, a continued sideways market trend and just possibly, a move higher from near these levels as we close out the last third of the year.
Tomorrow's job report is likely to be market moving for some reason; however, a report wildly above expectations is not expected. Wednesday's ADP Employment report indicated payrolls increased by 185,000 which was lower than the lowest estimate of 190,000. Consensus non-farm payrolls are expected to increase 212,000 with the low end of the range equaling 210,000. An increase above 300,000 is really what the this economy needs.
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