Weekly Sentiment Update: Can We Ride a F.O.M.O. Wave to SPX 2500+?
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.
Last week, traders swung to a moderately bearish stance.
But yesterday, the SPX blasted up to a new record high of 2418.71, so let's see just how quickly sentiment is turning.
(click here for a primer on these 5 sentiment indicators)
1) VIX Spread – Bullish
Last Thursday, the VIX spiked up to 16.30, but it's collapsed back down to 9.83, butting it within range of the the 9.56 generational low on May 9.
Last week, the VIX curve nearly inverted, but the 3-month curve is at +4.0, indicating traders not pricing in much near-term volatility.
Or in plain English, folks are bullish.
2) CNN Fear & Greed Index – Neutral
The Fear & Greed Index is at 56, up from 45 last week.
F&G operates on a 1-100 scale, and a reading of 56 is neutral.
3) AAII Sentiment – Bearish
The latest AAII Sentiment Survey shows that 32.9% of individual investors are bullish, up from 23.9% last week.
This 32.9% reading is below the 38.5% long-term average, and indicates that individual investors are not particulary trusting of the market.
4) CBOE Equity Put-Call – Bullish
The CBOE Equity-Put Call ratio was at 0.59 yesterday with a 3-day moving average of 60.3. These numbers are under historical norms, indicating that traders are not buying many put options. Therefore, they are bullish.
5) ISE Sentiment – Neutral
The ISE Sentiment Index is at 92 this morning (92 calls bought for every 100 puts). The 10 day moving average is 92.3.
These numbers show higher put demand, but they're actually in-line with recent averages, so I'll also lump it in as neutral again.
Conclusion
Out of 5 sentiment indicators, we have:
2 bullish (+2 from last week)
2 neutral (-1 from last week)
1 bearish (-1 from last week)
The numbers indicate that we're seeing much less fear than last week.
So the important question to ask is whether we're on the verge of outright forth.
I'm going to guess no.
The AAII Sentiment Survey indicates that individual investors are pretty skittish.
Typically, at tops, you see the masses wanting to get in.
On a related note, a recent Gallup poll showed that just 54% of US adults have participated in the 2009-2017 bull market.
From 2001 – 2008, 62% of adults owned stocks.
On a second related note, have you noticed the sudden BitCoin craze?
Crypocurrencies are going up 5% or 10% a day, which looks like the 1999 dot-com boom all over again.
If there's froth, it's in BitCoin, not stocks! (not that BitCoin can't double or triple from here…)
Looking forward, I'm wondering if the bears are destined to capitulate on a sudden wave of F.O.M.O. (fear of missing out), driving up SPX to 2500+ in a blowout move.
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