US Major Market Sentiment: The Bulls Vs The Bears

US Major Market Sentiment: The Bulls Vs The Bears


Sentiment Indicators

VIX: 19.81; +0.7
VXN: 23.08; +0.46
VXO: 21.42; +0.71

Put/Call Ratio (PCR) CBOE: 1; +0.07  recently 6 of 8 sessions over 1.0, 8 of 16 sessions below 1.0, 26 of the last 40 sessions above 1.0. This indicator is running very high in terms of negative sentiment.

The Bulls are at 34.7% Vs 26.5% last

For your reference: the Bulls hit their lowest mark in Y 2015 since the Ys 2008/2009 market dive.

The Bears are at 35.7% Vs 39.8% last

For your reference: 35% for Bears is the mark of a good Northside indicator. The best indication is when Bears cross up through Bulls as the 2 merge, this happened in the Fall of Y 2015.

Sentiment indicators are often used by investors to see how optimistic or pessimistic people are to current market conditions.

For example, a consumer sentiment index that shows pessimism may make companies less likely to stock up on inventory, because they may fear that consumers will not spend.

The VIX usually moves in the opposite direction as the S&P 500 is a danger signal as it broke through Key resistance

The higher the VIX, the more traders and investors are willing to pay for protection via options due to potential market risk ahead (see analysis below)

It is important to understand the relationship between implied volatility, and realized volatility, the actual gains or losses realized daily in the S & P500 benchmark index.

And, understanding the difference  between the 2 gives a close look at real market sentiment.

In August, realized volatility was around 6, and  implied volatility was around 12.  A VIX of 16 reflects the expectations of the S&P having 1% daily fluctuation up or down.

In mid-October last year during the strong selling pressure, the calculation moved North to 31.  Last week, the market saw some of the worst days of the year and here we are in October once again.

The VIX is higher on the volatility.

The Big Q: is the market’s Fear Gauge  telling the truth?

The Big A: This market is volatile, watch it carefully, and expect it to continue this way.

History indicates that a simultaneously rising stock market and VIX results in major tops, Y 2007 is a memorable example. This sympathetic move can continue for some time but it is always bad news if it does continue, and we saw it continue, and the market is in correction mode now.

Have a terrific week.

Paul Ebeling


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