|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Short-term
Outlook:
Intermediate-term Outlook:
What: We will remain Neutral for now.
Why: On January 8th, the
Dumb Money Confidence hit 75%, and nearly every time we've seen
that kind of extreme in the past 15 years, any further
short-term strength (over 2-4 weeks) was reversed
longer-term (over 1-3 months). That happened again,
then we got some conflicting studies in early February about
whether we were likely at a low. We were oh-so-close
to triggering some very bullish multi-week setups, but price
reversed too early and we were left out. We still don't have an
overwhelming number of
signs that we have seen a major market peak, and now we
have the
advance/decline line at a new all-time high and
extreme momentum in small-cap stocks, which
usually pull stocks up along with them. So unless
sentiment becomes overly optimistic very quickly, we'll
likely at least challenge the January highs...though the
risk/reward of trading it on an intermediate-term basis
seems only modestly positive due to the rally we've already
seen since the February low.
Sentiment:
Trend:
Mostly neutral.
Still pointing up. Sup / Res:
Other:
R: 1150; S: 1110 Positive breadth, small-cap
momentum
Equity Indicators - Updates and Extremes
Yesterday, there was a large spike in call option volume on
both the CBOE and ISE options exchanges. A fairly
large part of it (around 10% or so) can be attributed to
trading in Citigroup alone, but unless I'm missing
something, it wasn't enough to really skew the gist of the data. The chart below
shows two ratios. The first is the put/call ratio from the CBOE
exchange that counts only equity options (not indexes or ETFs). It
is shown on an inverse scale on the chart, so what looks like high
numbers are actually very low (meaning a lot of call volume
relative to put volume). The second blue
line is the equity-only call/put ratio put out by the ISE exchange.
This one shows a similar spike yesterday - in fact, to a new record
dating back to 2006.
Like most one-day extremes in put/call ratios, these were
most effective on a shorter time frame.
The table below shows every instance over the past four
years when the CBOE ratio was less than 0.5 on the same day
the ISE ratio was more than 225, along with the performance
of the S&P 500 over the next few days.
Date 3
Days Later Max Loss Max Gain
The results were pretty weak, with only one positive return
among the five. That one (from October 2009) was
just barely positive, and it gave back those gains the next
day, leading to a more substantial correction.
If we relax the ISE hurdle to 200 instead of 225, then we
get 13 instances. After every single one, the S&P 500
showed a lower close within a week, usually the next day.
This means that whenever we've seen this kind of spike in
the options ratios, the S&P was never able to gallop higher
without a pause - at some point soon, it closed below the
close of the day with the extreme ratios.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Equity Market Indicators
Notes: During the volatile correction into early February, we saw a spike in our Bullish (for the market) indicators to 30%, and the Bearish very nearly reached 0%. That coincided with the low in equities.
The rebound since then was met with mostly mediocre readings in our indicators, but that changed on Friday with more than 20% surging into bearish territory. It would need to reach at least 30% to signal any potential trouble, at least based on the tendencies we've seen since the March 2009 bottom.
More history:
* New extreme
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Bonds, Commodities and Currencies - Updates and Extremes
Speculative Positions and Public Opinion For The British Pound
It's no secret that sentiment towards many non-US and non-commodity currencies has been terrible. The Euro, Swiss Franc and British Pound have become a trio of ugly stepsisters in the forex world.
That's interesting, because they haven't even fully retraced their 2009 rallies, when they were so dearly loved. The British Pound, for its part, is currently sitting right at a 62% retracement of that 2009 recovery, which is often a drop-dead support level on pullbacks (though it works better in a longer-term uptrend than downtrend).
And sentiment has clearly soured. Speculators are net short the Pound to a record degree, and our latest Public Opinion has sunk to one of the lowest levels in the past 15 years.
I'm watching the 1.4900 area on the Pound very closely. It has the potential to form a double-bottom with the panic selling from March 1st, is an important support area technically, and we have extreme sentiment. That has the makings for a multi-week rally...with the caveat that currencies can trend something vicious, and any break below support would be game-over (unless it is then subsequently regained).
Jason Goepfert Founder, Sundial Capital Research, Inc.
Forwarding or other distribution of this email is prohibited without the express permission of Sundial Capital Research, Inc. If you do not possess a firm-wide license, then forwarding this message will violate your subscription agreement.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
© 2001-2010 Sundial Capital Research, Inc. All rights reserved. sentimenTrader.com is a trademark of Sundial Capital Research, Inc. Sundial Capital Research, Inc. 12527 Central Avenue NE, Suite 165 Blaine, MN 55434
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March
10, 2010,
7:05am EST
Neutral
From Feb 26, 1107
SPX
