Small traders pulled back on their speculation options activity last week. Overall options activity was among the least optimistic since the initial thrust off the pandemic low. If we're still in the same kind of market environment, then this should be a good sign for stocks.
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Part I highlighted that a very reliable indicator based on ticker XLK (Technology Select Sector SPDR Fund) gave a bullish signal following the selloff on 9/20. Part II highlights two alternative tickers to consider, using the same test.
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Natural gas is soaring but facing a critical resistance level. Option volatility is also rising significantly. Is there a way to play for a breakout without incurring a significant dollar risk if the breakout fails to materialize? Yes, but as always, the most important thing is to understand the potential risks and rewards involved fully. In this piece, we highlight an "example" trade to highlight the process step-by-step.
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Small traders pulled back on their speculation options activity last week. Overall options activity was among the least optimistic since the initial thrust off the pandemic low. If we're still in the same kind of market environment, then this should be a good sign for stocks.
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Let's review several absolute and relative trend indicators for domestic and international ETFs.
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Last week, the most important ETF in the world enjoyed a big and sudden reversal in sentiment.
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This week, a number of positive momentum and breadth trends ended after months (or even years), due in large part to Monday's "shocking" decline. Among sectors, we're seeing near panic-level washouts in Tech, Industrials, and the Hang Seng.
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This week, a number of positive momentum and breadth trends ended after months (or even years), due in large part to Monday's "shocking" decline. Among sectors, we're seeing near panic-level washouts in Tech, Industrials, and the Hang Seng.
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The Optimism Index (Optix) for the S&P 500 ETF surged from a pessimistic level over the previous three trading sessions. Let's assess the forward return outlook for the SPY ETF.
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Industrial stocks have suffered among the most out of any sector over the past month, the breadth suggests we're nearing panic levels.
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Sundial Capital Research is an independent investment research firm dedicated to the application of mass psychology to the financial markets. Sundial publishes the SentimenTrader.com website.
Our focus is not market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence.
