Traders Don’t Get Much More Neutral Than This!
Permabulls always say everyone's bearish.
And permabears always say everyone's bullish.
Neither side provides evidence for their views.
So I like regularly run through a wide variety of sentiment measures to get an accurate reflection of the market's mood.
According to 7 sentiment measures I track, traders appear to be very, very neutral, even though the S&P 500 is still within a stone's throw of the 2193 all-time high.
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 86th percentile.
So relative to calls, traders are paying more for 10% OTM 6 month puts than they have 86% of the time over the past 5 years.
2) AAII Sentiment – Bearish
The latest AAII Sentiment Survey shows that 25.5% of individual investors are bullish, well below the long-term average of 38.5%.
But what's really interesting is that bullishness has been below the long-term 38.5% average for 49 straight weeks!
3) ISE Sentiment – Neutral
The ISE Sentiment Index closed at 65 yesterday (81 puts for every 100 calls). And its 10 day moving average is just 101 — a level that indicates a neutral mood.
4) Wall Street Strategists – Neutral
The average year-end target price for the S&P 500 is 2171, according to Bloomberg. That implies the market rises 1% into year-end.
YAWN!
5) CBOE Equity Put-Call – Neutral
The CBOE Equity-Put Call ratio was 0.66 yesterday, which is just below the YTD average of 0.69. This points to neutral sentiment.
6) CNN Fear & Greed Index – Neutral
The Fear & Greed Index is at 48.
F&G operates on a 1-100 scale, and 50 is neutral.
So it's basically right in the middle.
7) Investors Intelligence – Bullish
Yesterday, the Investors Intelligence Survey of newsletter writers showed a slight decrease in bullishness to 46.1%.
This is still a positive reading.
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So we have 2 bearish indicators, 4 neutral indicators, and 1 bullish indicator.
Blend them together and you have a moderately bearish crowd.
I'm hearing a lot of bears say that everyone's complacent… but I just don't see it.
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