Permabulls always say everyone's bearish.<\/p>\n
And permabears always say everyone's bullish.<\/p>\n
Neither side likes to provide evidence for their views.<\/p>\n
So I regularly run through a wide variety of sentiment measures to get a realistic reflection of the market's mood.<\/p>\n
According to 7 sentiment measures I track, traders are slightly bearish, even though we're within 1% of the all-time SPX <\/strong>high.<\/p>\n Let's go through them one by one:<\/p>\n 1) SPX Options Prices – Bearish<\/strong><\/span><\/p>\n SPX options prices show a high put skew.<\/p>\n I looked at 10% out-of-the money 6-month SPX options. There is currently a 10 point skew on the puts, which is the\u00a098th percentile for the past 5 years.<\/p>\n So relative to calls, traders are paying more for 10% OTM 6 month puts than they have 98% of the time over the past 5 years.<\/p>\n 2) ISE Sentiment – Bearish<\/strong><\/p>\n The ISE Sentiment Index closed at just 63 yesterday (63 puts for every 100 calls).<\/p>\n And its 10-day moving average is just 81.1 — a level that indicates bearishness.<\/p>\n Markets tend to overheat with 10-day MA readings well over 100, so we're not even close to that.<\/p>\n 3) AAII Sentiment – Bearish<\/strong><\/p>\n The latest AAII Sentiment Survey shows that 24.8% of individual investors are bullish.<\/p>\n This is well below the long-term average of 38.4%, and below the 2016 YTD average of 28.1%.<\/p>\n Bearish sentiment is at 38.3%, the highest it's been since the February 11 bottom, when it spiked to 48.7%.<\/p>\n 4) Investors Intelligence – Neutral<\/strong><\/p>\n Yesterday, the Investors Intelligence Survey of newsletter writers\u00a0showed the 4th straight decline in bullishness with a drop to\u00a044.6% bullish from 49% last week.<\/p>\n Bears are at a 10-week high at 24.3%.<\/p>\n 5) CBOE Equity Put-Call – Neutral<\/strong><\/p>\n The CBOE Equity-Put Call ratio was 0.63 yesterday, which is above the YTD average of 0.5, and right in-line with the 5-year average of 0.65.<\/p>\n This points to neutral sentiment.<\/p>\n 6) CNN Fear & Greed Index – Bullish<\/strong><\/p>\n The Fear & Greed Index is at 61, which is modestly in the ‘Greed' category.<\/p>\n F&G operates on a 1-100 scale, and 50 is neutral)<\/p>\n 7) Wall Street Strategists – Bullish<\/strong><\/p>\n The average year-end 2017 target price for the S&P 500 is 2391.44, according to Bloomberg.<\/p>\n This implies a 9.7% gain from here — basically in-line with historic stock market averages.<\/p>\n *********<\/p>\n So we have 3 bearish indicators, 2 neutral indicators, and 2 bullish indicators.<\/p>\n Blend them together and you have a slightly bearish crowd.<\/p>\n I'm hearing a lot of bears saying that everyone's complacent… but I just don't see it.<\/p>\n