Part 1, on plan…

As the stock market takes the expected rally…

Part 1, per Friday’s article, was for terror stricken, over-bearish investors to spring a sentiment relief bounce; likely a strong one. The ‘Smart/Dumb’ money spread (discussed in NFTRH 691) below being just one of many over-bearish spike indicators.

This graph is two things, extremely over-bearish and thus, contrary bullish, and a picture of building pressure against the longer-term structural over-bullishness we’ve been noting in NFTRH for many months now. I won’t get into the details here, but ponder this and other short and long-term sentiment indicators and you’ll probably come to certain conclusions.

Meanwhile, the VIX continues to calm down, as if on cue. Again two things here, one short-term and one longer-term.

  1. There appears a good amount of downside space for the VIX short-term, with the implication of more upside for the stock relief party.
  2. Keep an eye on the potential VIX trend change going forward. You can gauge that by what the daily moving averages (SMA 50 & 200) do. A change to up in the trends would imply pressure against the market in line with other pressure gauges we are watching.

I am long a lot of things – including sizable cash – and short nothing right now. But depending on what market technicals and sentiment indicators do going forward that would change at some point.

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