All posts by Michael Comeau
Sentiment Report: When Extreme Bulls Get More Bullish
The bulls are back in town. Actually, they’ve been back for 3 weeks. Let’s move to our sentiment indicators so you can see what I mean: (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Late Friday morning, the VIX was as low as 9.96, which is pretty low based on historical norms. This gives us a 3-month spread at 3.00 indicating that traders are fairly bullish. But what’s really interesting is that the curve of the futures term structure is so flat. It’s almost shocking how little volatility is being priced in. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 62, which is down just a bit from last week. This index operates on a 0-100 scale, and a reading of 62 is basically neutral. I’m very surprised at this — I thought it would be higher. 3) AAII Sentiment – Bullish Now this is where things get REALLY interesting. The latest AAII Sentiment Survey shows that 52.6% of individual investors are bullish, up from 50.5% last week. This is the highest reading since November 13, 2014. Let’s keep in mind that the AAII sentiment number has been depressed all year. We’ve been hitting record highs nonstop, but this year’s average is just 35.1%. That’s below the long-term average of 38.5%. All year long, the permabears have been saying that retail investors are “all in.” Well, the permabears are finally correct! 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.5. This is well below the 0.655 long-term average. The 10-day moving average is 0.566, which is extremely low on a historical basis. And the 3-day moving average, which I use to measure very short-term bullishness, is 0.550 — again, very low. These numbers point to extreme bullishness among options investors, who seem to expect that we’re going to start 2018 with a big bang. Conclusion Out of 4 sentiment indicators, we have: 3 bullish (down from 4 last week 1 neutral (up from 0 last week) 0 bearish (flat from last we) On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. That time, the bulls were right to be so positive. Will they be right again? It’s hard to tell. We typically see extreme bullish sentiment at market tops. But we’ve had extreme bullish sentiment for 3 weeks now, and the bulls shows no sign of slowing down. They love this market. Now, if you’re not sure of where to put your money in 2018, I’d check out Scott Redler’s 2018 Market Outlook Report. It includes 24 investment picks that could seriously outperform in 2018, including names in the crypto currency, tech stock, financials, and commodities spaces. Click here to read more.
Continue Reading -->Sentiment Report: Manic Panic for the Holidays
Let me get right to the point: traders are crazy bullish right now. I love to troll the bears for crying that everyone’s too bullish, but today they’re finally right. Let’s work through the numbers so you can see what I’m talking about — and I’ll give you an idea of how you can start 2018 on the right foot. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Late Friday morning, the VIX was as low as 9.35, which is extraordinarily low based on historical norms. On Wednesday, it hit 8.9, the lowest level since the 8.56 all-time low from November 24. This gives us a 3-month spread at 3.8 indicating that traders are very bullish, and expect almost no volatility heading into the final week of the year. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 68, exactly flat from last week. This index operates on a 0-100 scale, and a reading of 68 is basically moderately bullish. 3) AAII Sentiment – Bullish The latest AAII Sentiment Survey shows that 50.5% of individual investors are bullish, a big jump from last week’s 45.0% reading. This is the single highest reading of 2017. So basically, it took 11 months of nonstop grinding up to get individual investors overly excited about stocks! It’s also well above the 38.5% long-term average. All year long, the permabears have been saying that retail investors are “all in.” Well, the permabears are finally correct! 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.560. This is below the 0.655 long-term average. The 10-day moving average is 0.563, which is extremely low on a historical basis. And the 3-day moving average, which I use to measure very short-term bullishness, is 0.550 — again, very low. These numbers point to extreme bullishness among options investors, who seem to expect that we’re going to end the new year with a big bang above SPX 2700. Conclusion Out of 4 sentiment indicators, we have: 4 neutral (up from 3 last week) 0 neutral (down from 1 last week) 0 bearish (flat from last we) On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. That time, the bulls were right to be so positive, because after that, all indices hit fresh all-time highs. But now I’m wondering if we’re about to see a repeat of December 2016. For the past two weeks, sentiment has been about as bullish as it gets, which incidentally, is exactly what happened last December. That resulted in a brief drawdown into the 2017 New Year, after which it was off to the races. Now, if you’re not sure of where to put your money in 2017, I’d check out Scott Redler’s 2018 Market Outlook ReportIt includes 18-22 picks that could seriously outperform in 2018, including names in the crypto currency, tech stock, financials, and commodities spaces. Heck, Scott’s even dipping his toe in precious metals! Click here to read more.
Continue Reading -->Sentiment Report: Traders Are Extra Bullish for the Holidays
Traders are squarely focused on the progress of the GOP tax bill. And judging by the market action on Friday, it certainly looks like they’re feeling that it’s going to pass soon: The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all hit fresh all-time highs The Russell 2000 is outperforming by a big margin The US dollar is rallying Bank stocks are rocking hard Gold slipped into the red. But with two weeks to go in 2017, just how bullish are traders on equities after a year of nonstop opportunities to buy the dip? Let’s take a look at our 4 primary sentiment indicators to see if traders are going gaga for stocks. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Late Friday morning, the VIX was as low as 9.51, which is very low based on historical norms. This gives us a 3-month spread at 4.18 indicating that traders are very bullish, and expect almost no volatility heading into year-end. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 68. This index operates on a 0-100 scale, and a reading of 68 is basically moderately bullish. 3) AAII Sentiment – Bullish The latest AAII Sentiment Survey shows that 45.0% of individual investors are bullish. This is the fourth highest reading of 2017, and a huge jump from last week’s 36.9% reading. It’s also well above the year-to-date average of 34.5% and the 38.5% long-term average. The long-term average is 38.5%, so a reading of 45.0% is basically fairly positive. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.560. This is below the 0.655 long-term average. The 10-day moving average is 0.592, which is very low on a historical basis. And the 3-day moving average, which I use to measure very short-term bullishness, is 0.560 — again very low. These numbers point to serious bullishness among options investors, who seem to expect more all-time highs into the new year. Conclusion Out of 4 sentiment indicators, we have: 4 neutral (up from 3 last week) 0 neutral (down from 1 last week) 0 bearish (flat from last we) On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. We’re seeing similar conditions right now. Stock market sentiment is about as bullish as it gets. So I’ll repeat what I just said: the trend can go on a lot longer than may seem reasonable. The market’s higher than it was on October 6, when many permabears were calling tops because sentiment was out of control. Could the market fall from here? Or course! But timing trades off sentiment is near-impossible. We very well could see a melt-up into year-end, so look both ways before crossing this bull!
Continue Reading -->Why Is Bitcoin Moving? T3 Live Readers Sound Off!
Yesterday, we held a Bitcoin survey to get our readers’ thoughts on the raging cryptocurrency. Bitcoin mania truly is running wild. As of the time of this writing, the app for digital currency market place Coinbase is at #2 in the Apple App Store: (screenshot taken at 7:20 a.m. ET Friday) Yes, Coinbase is pulling more downloads than Instagram, Snapchat, and Facebook. So what’s moving Bitcoin? Let’s take a look at our survey results question by question. Before we get started, please understand this: This survey is very informal, and should not be considered scientific. Take the answers with a grain of salt, and certainly don’t use them to make buy/sell decisions in Bitcoin or other cryptocurrencies. Question #1: Have you ever traded Bitcoin or another cryptocurrency? 35.7% of survey respondents said they have traded Bitcoin or another cryptocurrency. Just 26.2% responded “no, but i want to get started.” So it seems that many traders are still fairly skeptical. Question #2: Is it too late to get into Bitcoin? 42.1% said ‘I don’t know.’ Meanwhile, just 26.3% of respondents said yes, that it is too late to get into Bitcoin. Question #3: What asset do you think will perform best in the next 5 years? Just 22% of respondents believe “Bitcoin and/or other cryptocurrencies” will perform best in the next 5 years. Interstingtly that’s exactly the same number that believe ‘Gold or other precious metals’ will perform best. 51.2% respondents believe equities will perform best. Question #4 What do you think of Bitcoin and other cryptocurrencies overall? This was an open-ended question that allowed readers to type in their own responses. These are some of the comments we received. All are completely unedited: Backed only by virtual numbers 0 and 1 in the computersystems it’s even more worthless than all the out of thin air printed money from the centralbanks of the world I am very skeptical of the whole crypto currency marketplace. It’s unclear to me if it is just a fad or a legitimate trading opportunity. Who is regulating this? It’s clear people are buying. Do we know if anybody is selling and cashing in on it? I have heard it is difficult to get your order executed quickly when buying. My gut feeling is that this will end in tears for many.” The Value of the underlying “Distributed Digital Ledgers” or “Blockchains” actually exceeds the value of Cryptocurrencies as mediums of exchange. Not useful yet, only a speculation vehicle at this point for people who dont trust traditional investments Good money laundering instrument, most of them are fraudulent, the danger of having the exchanges or your wallet hacked are enormous Clearly highly speculative. Very similar to internet Bubble of 2000… but ultimately the 2000 spawned off big winners and many losers. This will probably be the same. Also many losers like Mindspring were temporarily BIG winners for a short term. I still think people should get in for at least the short term. But monitor closely and also should only put in a small amount toward speculative assets. revolutionary, I prefer etherium and litecoin, because fortune 500 companies are building infrastructure around them. We also received a number of single-word answers like ‘scam’ and ‘bubble.’ One commenter said “Bitcoin to 120K,” and that may have been sarcastic. To my surprise, there were no blatant “I love Bitcoin”type responses. Question #5: What do you think is driving the price of Bitcoin? Our final question was also open-ended, and we’re presenting some of the comments we received, completely unedited: FOMO (2) Limited Supply and a lot of demand Speculation Social media (tulip-mania) Tulip power. Drug dealers, hackers mafia, terror groups Speculation and anticipation of trading on CME lack of brain combined with a lack of history knowledge idea of replacing fiat currencies Law of attraction. Think about all of the media hype and energy being put into this thing. Whether you are for it or against it… you are still thinking about it…. That is the #1 reason the price is going up and will continue to go up a lot in the very short term. Lots of Chinese buying 1/10 shares thinking when the last coin is mined, supply and demand will be their friend! Interestingly, a number of survey respondents used variants of the word Tulip in reference to Dutch Tulip mania in 1636 – 1637. When creating this survey, I assumed we’d attract more Bitcoin bulls, but we got the opposite.
Continue Reading -->Gold in Focus Ahead of Jobs Report
Last week, traders were squarely focused on the progress of the GOP tax bill. But this week, it feels like everyone’s watching Bitcoin so much that the world’s forgotten about the stock market! In fact, look at what’s #2 in the Apple App Store: It’s Coinbase — the app for the popular digital currency market place! Yes, a Bitcoin app is pulling more downloads than Instagram and Facebook! With the November jobs report on the way this morning, let’s dig in and see how how bullish traders are feeling about the forgotten stock market ahead of the weekend. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish On Friday morning ahead of the November nonfarm payrolls report, the VIX was at 9.97, the first sub-10 reading since November 29. This gives us a 3-month spread at 4.36, indicating that traders are very bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is 60, dowm from 73 last week. This index operates on a 0-100 scale, so a reading of 60 is basically neutral. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 36.9% of individual investors are bullish. This is basically flat from last week’s 35.9+% reading, but it’s still way off the 45.1% level from 4 weeks ago, which itself was the highest since since January 5, 2017. The long-term average is 38.5%, so a reading of 36.9% is basically neutral. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.58. This is below the 0.655 long-term average. The 10-day moving average is 0.581, which is very low on a historical basis. And the 3-day moving average, which I use to measure very short-term bullishness, is 0.607. These numbers point to bullishness among options investors, who seem to expect a snap back to all-time highs in the SPX. ConclusionOut of 4 sentiment indicators, we have: 2 neutral (down from 3 last week) 1 neutral (up from 1 last week) 0 bearish (flat from last we) Here’s what I said last week: The permabears are still saying that everone’s all-in bullish and 100% complacent… and they’re right. If the bulls rush to the exits, they may face some trouble — there’s an awful lot of them, and only so many can fit through the door at once… Sentiment was very bullish last week, but it’s clearly cooled down this week. Judging by the VIX and the CBOE equity put-call, options traders see almost no volatility ahead — and a lot of upside potential. But when we mix in our data from the CNN Fear & Greed Index and the AAII sentiment survey, we a more nuanced picture. Market momentum has slowed, and individual investors are definitely in neutral territory. So clearly, traders are back in the “moderately bullish” camp. That’s not exciting to say, but it’s the truth. The big question now is what impact the jobs report will have on equities. I’m mostly interested in gold. Gold’s taken a big spanking, at least partially because Bitcoin has suddenly attracted a mountain of investor dollars. If we get a weak jobs report, gold could skyrocket, so keep an eye on it
Continue Reading -->Traders Don’t Have the Tax Bill Blues… Yet
Two weeks ago, I said “volatility is finally picking up!” Just like we’ve seen throughout 2017, like clockwork, the bulls came back in to push all indices up to fresh record highs. On Thursday, the S&P 500 set a new all-time high at 2657.54, with the Dow Jones Industrial Average crossing over 24,000 for the first time ever. Traders have been buying because they expect a tax reform bill. But on Thursday evening, the GOP push hit a wall as some lawmakers objected to the bill because of concerns over the Federal deficit. That sent futures down Friday morning, so let’s see how traders are feeling in the face of sudden uncertainty. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Yesterday, I pointed out that the VIX was surprisingly strong despite an impressive stock rally. This morning, the VIX is up 2.1% at 11.52, giving us a 3-month spread at 3.33, indicating traders are bullish. But keep an eye on the VIX. It’s been up for 5 of the past 6 days, and if equity markets weaken, it could spike. This gives us a 3-month spread of about +3.95, which means traders are very bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is 73, up substantially from 54 last week. This index operates on a 0-100 scale, so a reading of 73 qualifies as moderately greedy. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 35.9% of individual investors are bullish. This is flat from last week’s 35.5% reading, but it’s still way off the 45.1% level from three weeks ago, which itself was the highest since since January 5, 2017. The long-term average is 38.5%, so a reading of 35.9% is basically neutral. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.55 on Thursday, which is well below the 0.655 long-term average. The 10-day moving average is 0.574, which is very, very low. In fact, it’s the lowest 10-day moving average since December 16, 2016. And the 3-day moving average, which I use to measure short-term bullishness, is 0.590. That’s the lowest since December 21, 2016. These numbers point to aggressive bullishness. Conclusion Out of 4 sentiment indicators, we have: 3 bullish (up from 2 last week) 1 neutral (down from 2 last week) 0 bearish (flat from last we) The permabears are still saying that everone’s all-in bullish and 100% complacent… and they’re right. However, keep in mind that sentiment was even more positive back on October 6 when I declared: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. Of course, I hedged myself by adding that “the bulls may be insane… but they may also be right.” And they were right! All the indices have hit multiple record highs since then, while the bears are still on the floor crying. But maybe things are changing. Tax reform is now a mystery and the VIX may be on an upswing. If the bulls rush to the exits, they may face some trouble — there’s an awful lot of them, and only so many can fit through the door at once…
Continue Reading -->Sentiment Report: Traders Still Happy with the Low Vol Grind
In last week’s sentiment report, I said “volatility is finally picking up!” And then it collapsed all over again as the post-election bull market raged on, with all major indices including the Russell 2000 breaking to new all-time highs. The VIX fell back under 10, and the bears are once again asking “is this low-volatility grind ever going to end? Traders were in a pretty decent mood before Thanksgiving, and they’re looking happier Friday morning with futures bid higher. So let’s take a fresh look at our sentiment indicators to see how traders are feeling on today’s Black Friday “holiday.” (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Last Wednesday, the VIX hit a 3-month high at 14.51. It’s around 9.85 Friday morning.. That’s extremely low by historical standards, but it’s become the new normal… at least since the summer. This gives us a 3-month spread of about +3.95, which means traders are very bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 54, up slightly from 50 last week. This index operates on a 0-100 scale, so a reading of 54 is neutral. Before last Thursday’s big reversal higher, it was actually at 35. On October 6, it hit multi-year highs at 95, so it’s obviously come back down to earth. Funny — a lot of folks thought that 95 reading meant we were peaking. But markets kept pushing higher, showing how difficult it is to time tops and bottoms with sentiment indicators. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 35.5% of individual investors are bullish. This is up from last week’s 29.3% reading, but it’s still way off the 45.1% level from two weeks ago, which itself was the highest since since January 5, 2017. The long-term average is 38.5%, so a reading of 35.5% is basically neutral. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.57 on Thursday, which is well below the 0.655 long-term average. The 10-day moving average is 0.629, which is below the long-term average. Both point to bullishness. Conclusion Out of 4 sentiment indicators, we have: 2 bullish (up from 1 last week) 2 neutral (flat) 0 bearish (down from 1 last week) The permabears are still saying that everone’s all-in bullish and 100% complacent… but the numbers point to moderate bullishness. If you want to see full-on 100% bullish insanity, go back to October 6 when I declared the following: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. Of course, I hedged myself by adding that “the bulls may be insane… but they may also be right.” And they were right! The Russell 2000 shook off its cobwebs, tech picked up steam, and the bears got take to the woodshed. I suspect that with a few more days of upside, sentiment could go full on psycho bullish. And that’s not out of the question. Friday’s off to a great start already, and low trading volumes (due to the holiday) could exacerbate movement to the upside.
Continue Reading -->Volatility Returned. But Is There Any Fear Out There?
Volatility is finally picking up! The VIX hit 3-month highs on Wednesday, and we’ve had 4 down days in the last 6. And traders are finally starting to believe we’re on the verge of seeing the first real shakeup since the 2016 Presidential election. So let’s take a fresh look at our sentiment indicators to see how traders are feeling after the shakeup. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish As noted above, the VIX hit a 3-month high on Thursday. It’s since come back down towards 11 on Friday. This gives us a 3-month spread of about +3.60, which means traders are moderately bullish. As you can see in the chart below, the VIX may be breaking out above its depressed 50 day moving average the way it did in August: (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Neutral The Fear & Greed Index is at 50. This index operates on a 0-100 scale, so a reading of 50 is perfectly neutral. Before Thursday’s big reversal, it was actually at 35. On October 6, it hit multi-year highs at 95, so it’s obviously come back down to earth. Funny — a lot of folks thought that 95 reading meant we were peaking. But markets kept pushing higher, showing how difficult it is to time market moves from sentiment indicators. 3) AAII Sentiment – Bearish. The latest AAII Sentiment Survey shows that 29.3% of individual investors are bullish. This is a major collapse from last week’s 45.1% level, which itself was the highest since since January 5, 2017. The long-term average is 38.5%. 4) CBOE Equity Put-Call – Neutral The CBOE Equity-Put Call ratio was at 0.64 on Thursday, slightly below the 0.655 long-term average. The 10-day moving average is 0.652, which is right in-line with the long-term average. So it doesn’t get more neutral than this. Conclusion Out of 4 sentiment indicators, we have: 1 bullish (down from 3 last week) 2 neutral (up from 1 last week) 1 bearish (up from 0 last week) The permabears are still saying that everone’s all-in bullish and 100% complacent… but the numbers tell another story. If you want to see full-on bullish insanity, go back to October 6 when I declared the following: “Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash.” Of course, I hedged myself by adding that “the bulls may be insane… but they may also be right.” And the bulls were right, with the major indices continuing to march higher. Trader aren’t bearish. We all know that. But based on the numbers, it’s fair to call the crowd neutral. This is ultimately good for the bulls. The more doubt there is, the more potential upside firepower. In particular, if the Russell 2000 can stage a comeback, we could see a major spike in confidence… along with a major spike in price. Just remember, sentiment follows the action, which makes it awfully tricky to use to time trades. Plus, sentiment can stay at extreme levels for far longer than you think is reasonable. So always use this information as color — not as specific buy/sell signals.
Continue Reading -->Did Rolling Stone Jinx Tesla with the Magazine Cover Indicator?
So at 10:45 a.m. yesterday, I got an email with the subject line “The Most Important Person of Our Generation.” It came from Neil Strauss, author of the infamous pick-up artist memoir The Game: Penetrating the Secret Society of Pickup Artists: I know what you’re about to ask… And I can neither confirm nor deny that I read The Game. So, to whom was Neil referring as “The Most Important Person of Our Generation.”? Tesla (TSLA) CEO Elon Musk, whom Neil just profiled for a Rolling Stone cover story: Rolling Stone covers focus on entertainers, followed by politicians and athletes. I looked at hundreds of Rolling Stone covers going back to 1990 and I found exactly one CEO cover story… and it was about an even bigger tech icon. It was the October 27, 2011 issue commemorating Apple (AAPL) founder Steve Jobs, who had died 3 weeks earlier: Even in the late 1990’s dot-com boom, there wasn’t a single tech-focused Rolling Stone cover story, let alone a CEO story. And of course, this has me thinking about the magazine cover indicator. The magazine cover indicator says that a dramatic magazine cover story (typically a major business magazine like Fortune or BusinessWeek) can be a contrary indicator. The most famous example is BusinessWeek’s The Death of Equities cover in August 1979, which preceded the biggest bull market known to man. Chart from FinancialSense.com So did Rolling Stone ‘jinx’ Tesla? And the wider world of technology of stocks? Let’s see. In Neil Strauss email, he said he “spent the last nine months in and out of his world, working on this profile…” 9 months back from November 15 is February 15. Let’s assume that Rolling Stone spent a month before slating Musk for a cover story. In January, Tesla traded between $210.96 and $258.46. It hit $389.61 in September before pulling back to $312.49 when the story hit. Here’s what the stock chart looks like: Since Tesla’s at a bit of a crossroads now, only time will tell if Rolling Stone put in the ‘jinx.’ Or maybe I should put it another way. Only time will tell if Elon Musk marked a top in his ego — and by extension his Tesla/Solar City/Space X juggernaut — by agreeing to a Rolling Stone cover in the first place. So we’ll see. But what about technology overall? We know it’s been ripping since the election. But here’s a 20-year monthly chart of the S&P Technology ETF (XLK): Let me be clear: the magazine cover indicator should not be mixed up with actual science or rational analysis. It’s mostly valuable to permabears desperate for attention on Twitter. But I can’t help but ask: wouldn’t it be funny if tech topped out just as Rolling Stone broke tradition to put Elon Musk on the cover?
Continue Reading -->Did Traders Wake Up with the Shake Up?
On Thursday, we had our first hint of real volatility since October 25. The the SPX dropped -1.1% to an intraday low of 2566.33 before a bounce up to close at 2584.62. The VIX also rose over 20% to 12.19 before faltering. This came on the heels of some minor equity market deterioration as small caps and banks retreated. So let’s take a fresh look at our sentiment indicators to see how traders are feeling after the shakeup. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish As noted above, the VIX spiked over 20% on Thursday before coming back down, and it was at 11 Friday morning. This gives us a 3-month spread of about +3.50, which means traders are moderately. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 54. This index operates on a 0-100 scale, so a reading of 54 is almost perfectly neutral. 5 weeks ago, the index hit multi-year highs at 95, but it’s come back down to earth. Funny — a lot of folks thought that 95 reading meant we were peaking. But markets kept pushing higher, showing how difficult it is to time market moves from sentiment indicators. 3) AAII Sentiment – Bullish The latest AAII Sentiment Survey shows that 45.1% of individual investors are bullish, flat from last week.. This is above the long-term average of 38.5%, so it shows bullishness. In fact, this 45.1% level is the highest reading since January 5, 2017. AAII sentiment has been depressed throughout 2017 despite the market hitting a nonstop streak of all-time highs. This seems like a notable change. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.64 on Thursday, slightly below the 0.655 long-term average. The 10-day moving average is 0.631, which is slightly above the long-term average, indicating higher-than-normal demand for put options. I would call this very slightly bullish. So it looks like the little Thursday shakeup has had little to no impact on traders’ general bullishness Conclusion Out of 4 sentiment indicators, we have: 3 bullish (down from 4 last week) 1 neutral (up from 0 last week) 0 bearish (flat last week) Make no mistake, the crowd is bullish. But it’s less bullish than last week, and certainly less bullish than 5 weeks ago, when the CNN Fear & Greed Index was hitting multiyear highs. Incidentally, the VIX was setting new all-time records for weakness. So while the permabears are still saying the crowd is complacent, I’m not convinced. On October 6, I said this: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. Turns out those bull were right, though they’ve backed down from their optimism just a bit. Now we’re about to see if sentiment has pulled back enough to set the stage for another rally. I’d keep a close eye on the Russell 2000. It it rockets back up, the bulls are bound to go gaga once again. For now, it looks like a failed bull flag pattern is on the table: In an ideal world, the bulls will at least push it back into that upper range. Then again, the bulls haven’t needed an ideal world to find reasons to keep on buying. We’ll see if that changes.
Continue Reading -->