A look at the latest sentiment setup after the market’s recent volatility. Graphs from Sentimentrader.
Smart & Dumb indicators recoiled sharply. If this is another sentiment adjustment to refuel the bull these need not recoil anymore. This is a reading that would imply a kickoff to a bigger bear phase if markets break down (they came close but no cigar) or quite the opposite if markets continue to hold support parameters.
Indicators at extremes show that optimism got bled out while pessimism spiked and pulled back. Again, constructive as a bull refresher if markets hold support levels.
Current risk levels of various items.
Sector Optimism needs to be taken with a grain of salt as these readings are hyper sensitive from day to day and hence, trading off of them is for day traders (IMO). The greener the better from a contrarian standpoint.
Wheat is all alone in its greenness among commodities, and even it is only neutral.
Which leads to a position I added this morning, WEAT, for more agricultural exposure. I feel that it has come back down enough to rejoin the portfolios, but a trader or miserly buyer might at least wait for the SMA 50, if not lower (the main trend per the SMA 200 is up and that could also be tested). Personally, depending on the macro I have not yet decided whether I’d hold it, sell it or add to it on a test of the SMA 200.
Here is Wheat’s seasonality, which is in agreement that perhaps holding off another month might yield the best buy, as on average it bottoms in June before finishing the year strong. But the thing about seasonal averages is that they are just averages and any given year can and often will deviate. Just an FYI.