US Major Market Sentiment: the Bulls Vs the Bears

US Major Market Sentiment: the Bulls Vs the Bears


The sentiment indicators are reaching extremes.

The Bulls below 35%.

PCR at 8 sessions sessions over 1.0.

VIX marking above all peaks since Y 2008.

Sentiment Indicators

VIX: 26.05; -0.05

VXN: 28.75; +0.29

VXO: 25.52; -0.63

Put/Call Ratio (PCR) CBOE): 1.28; +0.08

The Bulls dove below 35% (faster than Bears climb), a Key mark, below which suggests sentiment is negative enough to produce the bounce we have seen.

The Bears have broken out, but may not make it over 35%, on the look out for the Bulls/Bear Cross, a positive indicator.

The Bulls are at 31.6% Vs. 37.7% last

For your reference: Bulls were last under 35%, the threshold for Bullishness, in early June 2012 when this rally began.

The Bears are at 22.5% Vs. 18.4% last

For your reference: A move over 35% for Bears is the mark to be a good Northside indicator.

Sentiment indicators are often used by investors to see how optimistic or pessimistic people are to current market conditions.

For example, a consumer sentiment index that shows pessimism may make companies less likely to stock up on inventory, because they may fear that consumers will not spend.

The VIX usually moves in the opposite direction as the S&P 500 is a danger signal as it broke through Key resistance

The higher the VIX, the more traders and investors are willing to pay for protection via options due to potential market risk ahead (see analysis below)

It is important to understand the relationship between implied volatility, and realized volatility, the actual gains or losses realized daily in the S & P500 benchmark index.

And, understanding the difference  between the 2 gives a close look at real market sentiment.

In August, realized volatility was around 6, and  implied volatility was around 12.  A VIX of 16 reflects the expectations of the S & P having 1% daily fluctuation up or down.

In mid-October during the strong selling pressure, the calculation moved North to 31.  Last week, the market saw the worst 2 days of the year.

The VIX spiked higher on the volatility.

The Big Q: is the market’s Fear Gauge  telling the truth?

The Big A: This market is volatile, watch it carefully, and expect it to continue this way.

History indicates that a simultaneously rising stock market and VIX results in major tops, Y 2007 is a memoral example. This sympathetic move can continue for quite some time but it is always bad news if it does continue.

Have a terrific week.

Paul Ebeling


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