The stock market has reacted quickly to policy uncertainty and tariffs, impacting Nasdaq stocks.
Technical analyst Helene Meisler sees a bearish, oversold market, hinting at potential rally.
Market sentiment charts show selling pressure subsiding, but panic could trigger a bullish turn.
The stock market's constant reaction to policy uncertainty and tariffs has dominated the news over the past few weeks.
But using headlines to guess where markets go next is a bad idea. Once information is widely known, it's already priced into the market and probably too late to react.
A close look at data demonstrates how quickly markets can react to a headline. For example, on March 3, President Donald Trump preemptively announced that tariffs on Canada and Mexico would go into effect the following day after he delayed them. Instantly, stocks making new lows on the Nasdaq spiked.
However, the same data can be used to gauge real-time market sentiment and find clues for where markets go next. Helene Meisler, a technical analyst who sifts through data and publishes charts weekly, says signals indicate that the market is in bearish and oversold territory — a sign that we could see an oversold rally in the near term. But if we don't, then panic can set in, she added.
"If we chop around here for a couple of days and then we rally again, maybe people get a little more excited, and they ease off a little bit on the bearishness," she said. "But ultimately, I think we're going down again."
The bottom isn't in yet since she doesn't see panic, something she uses the International Securities Exchange put-call ratio to determine. Once there are more options to sell (puts) than to buy (calls) for numerous days, it'll suggest panic. And once we get there, Meisler will turn bullish.
In mid-December, Meisler called for a correction in the first quarter. While she couldn't gauge the depth or reason for it, she advised taking profits ahead of the event, citing that the overbought/oversold oscillator was making lower highs, a sign that buying pressure was weakening.
"If you asked me back then what I thought would take the market down, I'm certain my answer was that, if we knew then it's already priced in," Meisler said. "So the answer is, I never know. It's always going to be something from left field."
Below are five charts Meisler is focusing on this week to gauge market sentiment and the stock market's near-term outlook. Market charts
The chart below shows the number of stocks making new 52-week lows traded on the Nasdaq Composite Index. It shows that over the past week, fewer stocks have made new lows, indicating that selling is drying up and bearish sentiment is slowing down. Meisler focused on the Nasdaq this week since the index saw the steepest pullback of the three major indexes. Nasdaq Composite New Lows StockCharts. com
The chart below shows overall market breadth, which tracks most stocks. It recently made a higher low, suggesting that selling pressure is subsiding.
In contrast, the lower chart for the S&P 500 shows the index continued to make a lower low, indicating a divergence as investors continued to shed off riskier, rich technology stocks. Still, it's a good sign because only a handful of stocks had been the mover of the major index.
"So, it tells you that the index movers are pulling the index down, but for the majority of stocks, the selling has stopped," Meisler said. NYSE Breadth (top) and S&P 500 (bottom) Helene Meisler
Below is a chart that shows stocks trading on the NYSE were in overbought territory in the final quarter of 2024. As we neared 2025, overbought peaks were making lower highs, indicating that buying pressure was drying up. However, March's oversold trough remained higher than December's oversold trough, suggesting there's now less momentum on the downside, Meisler said.
While stocks remain in oversold territory, they are beginning to recover as the oscillator approaches the zero or neutral mark.
The chart below is from StockCharts.com. NYSE overbought/oversold Oscillator StockCharts.com
Since 2024, the S&P 500's highs were accompanied by bulls at 60% based on data from the Investors Intelligence Survey, a sentiment survey for attitudes of US advisors.
"Over 60% is typically too many bulls, Meisler said. "I can't think of in my career, and I've been doing this since 1982, I can't think of one time we went over 70%."
Data from the previous week shows the bears are only at 27%. Bullish sentiment versus the S&P 500. Data investors Intelligence, chart by Meisler.
It's up to investors to decide what side of the market they'd rather be on.
"I have an old trader friend who always says, sometimes you want to be on the outside looking in, rather than on the inside wishing you were out," Meisler said. "And to me the market has that feeling to it right now. But if we got panic, I'd be bullish."
