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Weekly Sentiment Report: Are You Afraid of the Big Bad Earnings Wolf?


Are traders afraid of earnings?

That’s the question to ask following JP Morgan’s (JPM) kick-off of second-quarter earnings season.

Last week, traders were in a pretty happy mood despite a pickup in volatility, particularly in tech stocks.

Active traders are enjoying the back-and-forth action, because it’s bringing in more opportunities.

But let’s take a deeper look at market psychology to see how fear is in the market ahead of a pivotal earnings season.

So let’s take a look out our 5 sentiment indicators to see just how bearish traders are after yesterday’s volatility spike.

(click here for a primer on the 5 sentiment indicators below)

1) VIX Spread – Bullish

The VIX broke under 10 today in the aftermath of the weak retail sales and CPI numbers, which presumably support and accomadative Fed policy.

That puts the 3-month spread up to 4.0, which means traders have very little fear of volatility.

This is up from last week’s 2.8 reading.

(click here for a primer on the VIX spread)

2) CNN Fear & Greed Index – Neutral

The Fear & Greed Index is at 51, up from 44 last week.

The F&G Index operates on a 1-100 scale, and a reading of 51 is right smack in the middle.

3) AAII Sentiment – Bearish

The latest AAII Sentiment Survey shows that just 28.2% of individual investors are bullish, down slightly from 29.6% last week.

This 29.6% reading is well below the 38.5% long-term average, and indicates that individual investors still don’t trusth the market.

This has been the trend all year, even when the SPX was hitting record highs with basically no volatility.

In fact, despite the market’s stunning resilience since the election, the average bullish reading this year is just 33.3%.

Since so many traders make comparisons to 2007, let’s take a look at the averages back then.

From the start of 2007 to July 12, 2007, the average was 41.6%.

That’s a huge difference.

4) CBOE Equity Put-Call – Neutral

The CBOE Equity-Put Call ratio was at 0.62 yesterday, which is a slightly bullish reading

The 3-day moving average is 0.64, which is right in-line with the long-term average.

These numbers indicate that traders are modestly bullish.

5) ISE Sentiment – Neutral

The ISE Sentiment Index is at 85 (85 calls bought for every 100 puts. The 10 day moving average is 101.6 (101.6 calls for every 100 puts)

This indicates that traders are neutral.


Out of 5 sentiment indicators, we have:

  • 1 bullish (down from 2 last week)
  • 3 neutral (up from 2)
  • 1 bearish (flat)

We’re seeing a tad less bullishness relative to last week.

The market’s had a pretty nice little move off the June lows, with decent strength in biotechs and small caps.

But it looks like traders aren’t quite ready to put the pedal to the metal as we start to move into the heart of earnings season.

Netflix‘ (NFLX) report on Monday could indeed be pivotal since the reaction will tell us how the market may treat other tech sector reports.

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