US Stock Market Sentiment

A mid-week sentiment update on our friendly bloated hog, the US stock market…

The post-breakout rally in SPX (weekly) has been the robo variety. It has feasted on sentiment twitches first from the remaining trade war reverberations, then the Santa seasonal and finally the little US-Iran war drums reset.

The NFTRH targets have been (roughly speaking) 3200 check, 3300 (almost) and a silly target that shall remain nameless predicated on the VIX dropping to the sub-floor from its current status wallowing on the floor. Unlikely, but… the picture here is a bad risk vs. reward proposition. This chart demands that retaining profits be a priority (speaking personally, at least).

spx & vix

VIX has been diverging from Inverse SPX. This signal preceded heavy corrections twice in 2018 but failed to do much damage in 2019. But there it is anyway.

spx & vix

Investment managers are briskly FOMO’ing the market and that is a high risk signal for correction.

The theme here is to smooth out the Equity Put/Call ratio to its 10 week moving average in order to visualize extremes. Well Bueller, an over bullish extreme has finally materialized here to cancel out the Christmas Eve massacre of 2018.

cpce

AAII are curiously subdued, but a couple points here. 1) The sentiment extreme in January of 2018 (also seen in Investors Intelligence and several other indicators) was in my opinion THE extreme. All we are looking for in the indicators now are a secondary reading. 2) AAII have become more stubborn as a contrary indicator than the NAAIM, for example. But if you want to cherry pick still okay signals for the market, here is one for you.

aaii

Smart & Dumb money indicator alignments (Sentimentrader) are more extreme than those that came before the last two market corrections. Very negative sentiment profile here.

smart & dumb money

Indicators at Extremes are also in a very high risk alignment.

sentimentmarket sentiment

So there is our little stroll down sentiment lane at mid-week. Do with it as you will.

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