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.
- There appears a good amount of downside space for the VIX short-term, with the implication of more upside for the stock relief party.
- 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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