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Here’s a quick recap of this week’s sentiment analysis:
Last week the retail investor’s sentiment as measured by this survey was almost perfectly balanced. This week’s results push the bulls ahead with 39.73% of respondents and the bears at only 35.62%.
According to Wall St. lore, a bull market climbs a “wall of worry”. But according to these numbers, we don’t even have a pile of bricks.
From ChartCraft’s sentiment survey of newsletter editors taken on December 16th, 2008: the bulls continued to tip-toe up, reaching 26.9%, while the bears were little changed (albeit up slightly) to 47.3%.
The important thing is that we aren’t seeing what I’d ideally like to see: a resounding pessimism, even in the face of a rebounding market. That makes it difficult to believe we won’t see some sort of weakness ahead.
Tuesday’s big up move pushed the ISE sentiment index (equity only) all the way up to 176. Which means that on that day, 176 calls were traded (to open) relative to 100 put trades. That is a tad high, definitely above average for the year, but not extremely high.
For the most part, the ISE is stuck in a frustratingly tight trading range. So far it has refused to show any real signs of fear, even during the most hair raising down days of this harrowing bear market.
CBOE Put Call Ratio
While I have bemoaned the crazy options market behavior lately, I decided to have another go at it. This time, I stepped back and looked at the 14 day moving average of the CBOE put call ratio (equity only). Surprisingly, things look much saner through this filter:
Finally! Volatility has collapsed and not a moment too soon. I was afraid my crystal ball was getting foggy. Turns out all it needed was a formidable double top from historic highs:
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