Bobby, this is not exactly true...the sentiment bottom in '98 was much much deeper than this one, in which e.g. Rydex and p/c ratios never got even remotely to oversold levels. i remember the rally off the October low in '98 was widely disbelieved, and OEX p/c ratios stayed high throughout, until the first intermediate term top was reached.
in '98, at the bottom the Rydex ratio reached 2,0 (the one including MM funds 3,41)...the recent bottom coincided with a vey low 0,21 R ratio, and a fall in margin debt by a measly 10%. put/call ratios peaked where they bottomed in the past. that is NOT a credible fear driven sentiment bottom.
i'm not saying the rally can't go on a bit longer, but once extremes as now are reached, it's life is limited. oh yes, and over 80% of Rydex assets are back in tech....
and the CBOE overall p/c ratio has seen 15 readings below 0,50 out of the last 17 daily readings. in other words, there's no disbelief here...on the contrary, the complacency and conviction are obviously quite widespread and deep.
i'm also concerned by the record net short position by commercials in the spoos, two CFTC reports in a row. the last time this occurred was the reporting period preceding the July '98 top.
my guess is that the upcoming top in the SPX/OEX will be of a similar, if not larger degree magnitude. i admit though that we could see a continuation of the current rally purely on chart based momentum buying and eoq tape painting.
that would ensure that the top will be accompanied by the worst sentiment picture ever, surpassing the records set in Q1.
good night,
hb |
