Weekly Sentiment Report: Traders Are Pretty Darn Neutral
Permabulls always say everyone's bearish.
And permabears always say everyone's bullish.
Neither side ever provides evidence for their views.
So I regularly run through a wide variety of sentiment measures to get an accurate reflection of the market's mood.
According to 6 sentiment measures I track, traders appear to be shockingly… neutral.
Seriously, when I mash all the data together, I get a crowd that looks split right down the middle between bulls and bears.
1) SPX Options Prices – Bearish
SPX options prices show a high put skew. I looked at 10% out of the money 6 month SPX options. There is currently a 9.6 point skew in implied volatilities on the options. That's the 88th percentile.
So relative to calls, traders are paying more for 10% OTM 6 month puts than they have 88% of the time over the past 5 years.
2) AAII Sentiment – Bearish
The latest AAII Sentiment Survey shows that 28.8% of individual investors are bullish, well below the long-term average of 38.5%, and below the 2016 YTD average of 28.1%.
Bearish sentiment is at 27.9%,down huge from last week, and slightly lower than the 30.3% long-term average.
3) Wall Street Strategists – Neutral
The average year-end target price for the S&P 500 is 2171, according to Bloomberg. That implies a 1% gain into year-end.
4) ISE Sentiment – Neutral
The ISE Sentiment Index closed at 130 yesterday (130 calls for every 100 puts). This is a bullish reading And its 10 day moving average is just 94 — a level that typically indicates modest bearishness. So we'll call it neutral.
5) CBOE Equity Put-Call – Bullish
The CBOE Equity-Put Call ratio was 0.66 yesterday, which is just below the YTD average of 0.58.
This points to slightly bullish sentiment.
6) Investors Intelligence – Bullish
Yesterday, the Investors Intelligence Survey of newsletter writers showed a slight increase in bullishness to 46.7%. This is high relative to long-term averages. Bears fell to a 3-week low to 22.8%.
*********
So we have 2 bearish indicators, 2 neutral indicators, and 2 bullish indicators.
Blend them together and you have a crowd that looks pretty darn neutral.
I'm hearing a lot of bears say that everyone's complacent… but who are they talking about?
100% FREE eBook
Learn powerful concepts from the $795 Trading the Pristine Method Course.