Sentiment
To Everyone: Congratulations on a good thread. I, too, believe that extreme sentiment readings serve as low risk entry points for short-term and intermediate term trading. I use the Investor's Intelligence surveys (intermediate term) and the CBOE put-call ratios (short-term).
Another indicator I have found quite useful is the put-call premium number given in IBD. It has called every major intermediate term bottom of the last several years that I could find the data for. Readings below .40 are very bullish. In each case, however, these readings were accompanied by CBOE put-call ratios of over 1.00. This past Wednesday, the put-call premium was at .40, however, the CBOE strangely has not given us a 1.00 reading during this entire correction, due to the lack of OEX and SPX index put buying. Until recently, OEX and SPX put buying routinely exceeding call buying on the daily basis, even when the market was rising. During this correction, that has not been true. I believe that the equity put call ratio is relatively high, but I have not tracked this on a daily basis so I do not know the appropriate parameters as I do for the combined index/equity CBOE readings.
Examples of the low-put-call premium numbers and intermediate term bottoms (which seem to work well for high-tech bottoms).
December 9, 1994 Reading=.34 -NASDAQ hits intraday low of about 1211-the ultimate end of the 1994 stealth bear market. Put-call ratio of 1.57-the highest reading I have ever recorded in over 10 years.
January 9 and 15,1996 Reading=.38 and .42, respectively. SOX bottoms at 163.77 intraday on Jan 16 and closes at 172.67 and rallies to 211 by Feb 6. Dow rallies from 5044 on Jan 15 to 5539 by Feb 8.
July 15, 1996 (one of our most recent memorable days, along with July 16) Reading is .29, the lowest since before 1990 and perhaps ever. Followed a reading of .42 on July 8. CBOE put-call ratios were 1.06 and 1.16 on July 15 and July 16, respectively.
SOX index followers: An amateur Elliot Wave review of the SOX index.
Preferred interpretation: A complex wave four correction ended at 247.22 on March 24. A wave 5 (consisting of five subwaves) began at 247.22, with subwave 1 ending at 280.10 on March 26 (33points), subwave 2 ended mid-day April 3 at 259+(almost exactly a .618 retracement of wave 1), subwave 3 is currently in progress with a target of about 293 to 313. I find these numbers hard to believe given the current market climate, however, this is what I see looking solely at the patterns.
Second interpretation: The larger wave 4 is not over as postulated above. Thus, the current rally is a B wave or an X wave to be followed by a C or an A-B-C corrective wave(s). |
