NFTRH; Market Sentiment Update

As of yesterday the market’s sentiment profile was poking up into more dangerous territory.  Courtesy of Sentimentrader

The indicators had been showing pessimism as being wiped out but optimism still muted.  Well now optimism is getting frothy as SPX hits the upper parameter of the low 2100’s.


Dumb money is lunging toward the extreme line, still perfectly aping the market’s bounce.


Wall Street strategists expect the rally to continue.


When strategists were more optimistic, returns were worse.


When they were less optimistic, returns were better.


Short-term sentiment view.


Medium-term sentiment view.


Bottom Line

The market is knocking on the door of an over bullish sentiment fueled blow off.  But it has not opened that door yet and taken the ball from the bears.  Ref. RUT 2000 above 1180 and SPX at the upside parameter around 2100.  Whether or not things resolve bullish, the risk profile does not change from what has been noted to this point; risk vs. reward is very negative from a contrary standpoint.

That type of a profile can accompany an upside blow off and if so, it would likely be very bearish when it runs its course.  Risk vs. Reward is not about price in the short-term.  It is about risk.  Think of it this way, RvR was compellingly bullish in August and September but it took a long time for it to resolve.  The same thing happens in the other direction.

More perspective for consideration.