0 bearish (down\u00a0from 1\u00a0last week)<\/li>\n<\/ul>\nTraders are much, much more bullish than last week, and this is perhaps best seen in the AAII Sentiment and CBOE equity put-call measures.<\/p>\n
AAII sentiment isn't bullish. But it's made a huge jump, and a relatively large number of individual investors just got on board the bull train.<\/p>\n
The CBOE equity put-call is even more interesting. It has been below the long-term average for 11 of the past 13 trading days, which implies that traders are loading up on calls.<\/p>\n
I love trolling the permabears by correctly pointing out that they always say everyone's bullish — even when the numbers clearly point to bearishness.<\/p>\n
But today, the permabears are right.<\/p>\n
The crowd is very bullish, which leads to a very logical question: are we set for a fall?<\/p>\n
It's tough to say.<\/p>\n
I would watch for a drop in the VIX to the 9.5 to 9.75 range. That could mark extreme complacency, providing a possible opportunity to speculate on a market dip and spike in volatility.<\/p>\n
In such a scenario, I would certainly consider buying SPY puts, since they provide a cheap, efficient, and liquid way to speculate on a market decline.<\/p>\n","protected":false},"excerpt":{"rendered":"
This week, the SPX set multiple records with a new all-time high at 2498.43. And the index is still within striking distance of 2500, even with a missile launch in North Korea and a terror attack in London. So are traders complacent? Are the bulls asleep at the wheel? Let’s find out using our 4 sentiment indicators. (click here\u00a0for a primer on the sentiment indicators below) 1) VIX Spread – Bullish The VIX is once again hovering around the 10 level, indicating that traders are not pricing in much volatility. The 3-month spread is at +3.86, which means traders are fairly bullish. When this number moves above +4.5, then it’s a clear sign of froth. We’re obviously not there yet. (click here\u00a0for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 73, nearly doubling from 38 last week. The F&G Index operates on a 1-100 scale, and a reading of 73 qualifies as fairly bullish. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 41.3% of individual investors are bullish. This is up huge from 29.3% last week. This 41.3% reading indicates that individual investors are neutral, though it’s much higher than the year-to-date average of 32.9%. This reading has been fairly depressed all year, so I was surprised to see such a big jump, even with the market’s upward momentum. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.56 Thursday, which is well below the long-term average of 0.655. The 3-day moving average is 0.5633, and\u00a0the 10-day moving average is 0.598. Both are also below the long-term average, and indicate higher-than-normal demand for call options. Conclusion Out of 4 sentiment indicators, we have: 3 bullish (up from 2 last\u00a0week) 1 neutral\u00a0 (up\u00a0from 1 last week) 0 bearish (down\u00a0from 1\u00a0last week) Traders are much, much more bullish than last week, and this is perhaps best seen in the AAII Sentiment and CBOE equity put-call measures. AAII sentiment isn’t bullish. But it’s made a huge jump, and a relatively large number of individual investors just got on board the bull train. The CBOE equity put-call is even more interesting. It has been below the long-term average for 11 of the past 13 trading days, which implies that traders are loading up on calls. I love trolling the permabears by correctly pointing out that they always say everyone’s bullish — even when the numbers clearly point to bearishness. But today, the permabears are right. The crowd is very bullish, which leads to a very logical question: are we set for a fall? It’s tough to say. I would watch for a drop in the VIX to the 9.5 to 9.75 range. That could mark extreme complacency, providing a possible opportunity to speculate on a market dip and spike in volatility. In such a scenario, I would certainly consider buying SPY puts, since they provide a cheap, efficient, and liquid way to speculate on a market decline.<\/p>\n","protected":false},"author":2,"featured_media":13133,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-16253","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"_links":{"self":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/16253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/comments?post=16253"}],"version-history":[{"count":2,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/16253\/revisions"}],"predecessor-version":[{"id":16286,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/16253\/revisions\/16286"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/media\/13133"}],"wp:attachment":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/media?parent=16253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/categories?post=16253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/tags?post=16253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}