Bears Scream After the Donald Trump Bump

The ISE Sentiment Index is one of my favorite sentiment measures.

It is a call-put ratio (as opposed to a put-call ratio) that uses opening long customer options transactions to judge sentiment. It excludes trades like short puts (which are bullish positions) and trades from market makers and firms, which to me makes it more useful than straight put-call ratios.

As of yesterday's close, the ISE's 10 day moving average was just 67.

That is an all-time low, and it's likely to go even lower tomorrow.

As of 10:30 a.m. ET, the ISE was at just 44.

If it closes at 44, the 10-day moving average will be down to 66.

Over time, the ISE has fallen as equity options have increased in popularity as a hedging instrument, even for credit investors looking for protection in illiquid assets like high-yield bonds.

But still, this is a pretty depressed reading.

It's lower than readings seen at the August 24, 2015 mini-crash.

And prior to this 10-day stretch, the ISE averaged 87 this year.

And the 10-day moving average bottomed at 76 during the February mess.

In my experience, when you have technically stretched markets and bearish sentiment, we tend to see a stalemate.

That said, other sentiment indicators I follow like the CNN Fear/Greed Index and AAII Sentiment paint a slightly different picture.

But after the 2-day Trump bump, it's safe to say fear is setting in again.

Check out this chart of the S&P 500 against the ISE Sentiment Index:

As you can see, when the ISE gets to these depressed levels, the market tends to bounce.

However, we're in uncharted waters from a political standpoint, and it still feels like we're in an “anything goes” environment.

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