The equity markets have been anything but kind to investors long stocks. Nearly all the broad market equity indices are in negative territory for the year: the S&P 500 Index: -6.2%, Dow Jones Industrial Average: -8.5%, S&P MidCap Index: -4.4% and the S&P SmallCap Index: -4.6%. Simply reviewing social media comments from investors, one could be lead to believe the market has no where to go but down. Admittedly, the market trend and direction of least resistance does seem to favor the bears; however, some technical data is beginning to potentially signal a turn to a more bullish posture.

In August when the S&P 500 Index dropped to 1,867 the CBOE Equity Put/Call Ratio spiked to over 1.0 indicating a potentially oversold market. The market did recover from that August low, but recently has resumed its downtrend. Sometimes a better indicator is to look at the 21-day moving average of the put/call ratio. As can be seen in the below chart, the moving average of this ratio has begun to trend lower after reaching a high of .79 on 9/18/2015. Declines in this ratio are generally associated with a market that trends higher on a go forward basis.

From The Blog of HORAN Capital Advisors

From an individual investor sentiment perspective, the recent American Association of Individual Investors’ weekly Sentiment Survey indicated the individual investor bullish sentiment remains at low levels. This is a contrarian measure and low bullish sentiment is associated with a market that tends to be oversold.

From The Blog of HORAN Capital Advisors

In looking at the market (S&P 500 Index) itself, various technical indicators are attempting to form bullish patterns. The below chart represents the daily view of the S&P 500 Index and the last technical indicator on the chart, the Money Flow Index, is tracing out a series of higher lows. Not so positive is the fact the MFI is also creating a series of lower highs and this is not a much different pattern the S&P 500 Index had created a few weeks ago. A move above the red resistance line for the MFI would be one positive technical indication for the market.