Friday Market Sentiment
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
The Tuesday, Wednesday, Thursday posts were all published earlier today.
We finally received what we wanted in the newsletter survey. The bulls have now declined to a level where a bottom in stock prices can form. I'm not saying the bottom in prices has been reached, I'm just saying the newsletter sentiment is at a level where it can happen. The individuals very early on recognized that there is a serious problem in the stock market, and their sentiment led stock prices lower instead of following the market lower like the newsletter writers. The wrong-way blogger sentiment could still move lower, but it is now also dipping which adds to the overall gloomy mood. This mood indicates that a lot of the selling has been completed and the buyers can now begin to gain the upper hand. From a contrarain point-of-view, sentiment is now favorable towards higher stock prices.
The excellent longer-term chart shown above is provided for free by Market Harmonics. It shows the bulls very close to their extreme lows. Now we could use a bit of a shift into the bear camp as well, and then we'll have an ideal set up for prices to begin a sustained advance.
I won't show the VIX chart since it has been shown in every blog and newsletter in existence this past week. Needless to say, the VIX finally spiked to levels where you can expect to see stock prices start to firm. It looks like paying attention to the VIX has paid off during this correction.
The chart above still leaves some doubt about the extent to which investors are pessimistic about stocks. It has been a really miserable number of weeks in the market including 20% and above losses in most indexes. Yet this put /call ratio hasn't even exceeded the prior peak. Maybe the very long-term, multi-year uptrend in this ratio is over, and this lack of fear of lower prices is helping keep a cloud over stock prices and contribute to a new bear primary trend. Also note that this indicator completely broke down as a buy/sell signal tool late last year. Maybe all the volatility in the market has caused it to go out-of-sync with the market cycles, and it needs to time to sync back up again.
I may be reading too much into this and need to give the ratio some time to prove itself. Hopefully, prices can hold above this week's lows while we're waiting.
