Short-term optimism has spiked

The S&P 500's rally of 27% from its closing bottom in March has pushed many of our Optimism Index (Optix) indicators for ETFs to excessive optimism territory.

This is typically a short-term bearish factor for stocks, but over the longer-term isn't really a concern. For example, SPY's Optix is at 98 as of Tuesday's close:

S&P 500 optimism index

When this happened in the past, SPY faced mild weakness over the next 1-2 weeks, though it wasn't bearish after that. If we isolate for historical cases that occurred while the S&P 500 was under its 200 dma (i.e. still in a long term downtrend), SPY's 1 week forward returns were more negative according to our Backtest Engine: 

Returns after high SPY optimism

This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.

We also looked at:

  • A look at the Optix values for other indexes, including overseas
  • Stocks have enjoyed a huge number of Point & Figure buy signals
  • We barely missed triggering multiple versions of Wayne Whaley's breadth thrusts
  • What happens when the VIX drops below its 50-day average after a spike
  • The Nasdaq's breadth has been "weak" (yes, that's in quotes)

The post titled Short-term optimism has spiked was originally published as on on 2020-04-15.

At, our service is not focused on 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. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

Follow us on Twitter:

Subscribe to our Youtube Channel:

RSS Feed

Subscribe to the Blog RSS feed