| Sentiment Indicatrs meet Extrm Levels,not Great Tmng Device |
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Jon
Preferred Member
Cash: $ 50.02
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Joined: 13 Apr 2005
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| Sentiment Indicatrs meet Extrm Levels,not Great Tmng Device |
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Last week saw bullish and bearish advisors butt head to head with the lowest bullish reading since the October 2002 bottom. That follows the spike higher in the VIX to 23.81 the week before and the almost four weeks of the put/call ratio closing at 1.0 or better. Sentiment indicators have hit relatively extreme readings, particularly with respect to bulls/bears and the put/call ratio. Volatility spiked to levels not seen since March 2003 when the market was testing its strong move off of the October 2002 low.
That may or may not be enough to shove stocks higher after this two-leg decline. When volatility, the put/call ratio and the bulls/bears hit levels that sparked prior rallies in this overall uptrend failed to do so after that first leg lower, we surmised it would take more to get this market moving back up. It has experienced more selling and some impressive bearish sentiment. It still might take a spike in volatility into the forties to do the trick.
That is the story with sentiment; it gives you an indication that things are getting ripe to change direction, but it is not great at timing. Back in 2002 as the market was bottoming the indicators were getting very extreme but it took the market three months of volatility spikes to finally put in the bottom. Thus just because we see volatility spike and bulls and bears hit extremes, that does not mean happy times are here right away. The market also has to do its part with a bottom, a follow through, and rebuilding some bases to have the strength to sustain any moves higher. We like what we see in the sentiment, but the market has yet to show us it is ready to make the move. It is trying to drum up some leadership, but it we are still looking for it to clear resistance.
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Mon Jun 26, 2006 2:49 am |
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