Weekly Sentiment Update: The Bears Were on Patrol, Even Before Syria and the Weak Jobs Report


Permabulls always say everyone's bearish.

And permabears always say everyone's bullish.

But let's look at the actual numbers to see how the crowd actually feels.

With the US missile attack on Syria and the NFP report miss, now is the perfect time for a sentiment update.

Last week, the bears were out in force as we digested near all-time highs.

But with the bulls still holding steady, let's see if anything's changed.

1) VIX Spread – Neutral

The VIX spiked a bit post-Syria, but interestingly enough, it's now DOWN on the day — even after the NFP miss.

That has the 3-month VIX spread is at +2.16 which indicates that traders are starting to grow skittish. Readings around +2 are neutral.

2) CNN Fear & Greed Index – Bearish

The Fear & Greed Index is at 43, up slightly from 34 last week.

F&G operates on a 1-100 scale, and a reading of 43 means traders are moderately fearful.

3) AAII Sentiment – Bearish

The latest AAII Sentiment Survey shows that 28.3% of individual investors are bullish, down from 30.2% last week.

This is well below the long-term average of 38.5%.

4) CBOE Equity Put-Call – Bearish

The CBOE Equity-Put Call ratio was at 0.66 yesterday with a 3-day moving average is 0.63. This is indicates that traders are slightly bearish.

5) ISE Sentiment – Neutral

The ISE Sentiment Index is at 108 (108 calls bought for every 100). The 10 day moving average is just 90. This indicates that demand for put options continues to outstrip that for calls.

However, I'll actually call this neutral because the ISE Sentiment index has been so down for so long that 90 is actually high relative to recent history.

Please note: I am strongly considering dumping ISE Sentiment from this weekly update simply because it's almost always reading bearish no matter what happens in the market.

I may replace it with the CBOE Skew Index, which measures how much traders are paying for protection against tail risk.


Out of 5 sentiment indicators, we have:

0 bullish
3 bearish
2 neutral

This shows even more bearishness than last week.

Note that the all of these indicators except for the VIX spread, were released BEFORE the attack on Syria and the nonfarm payrolls miss.

So it's not like the market was necessarily braced for good news, even though traders were optimistic about NFP because of the recent ADP and jobless claims beats.

It is indeed possible that the next readings of the 4 others may grow more bearish in the near future.

And interestingly enough, the SPX just slipped into the green, thoguh small caps and banks are underperforming.

It should be an interesting day, to say the least…

Leave a Comment:

1 comment
JMV says April 7, 2017

Sentiment indicators are contrarian indicators so having all these bears is only going to fuel the rally… The majority is always wrong.

I’ll get really concerned when sentiment turns bullish. Till then and if we manage to close unchanged today, we have a higher low on the daily chart. Watch for a breakout next week as the bears get overrun..

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