M,
<< As for a 3 week rally right now, I believe you are very very wrong. >>
Don't know what you're talking about. Maybe you're mixing me up with somebody else.
<<People are bouncing from extreme exuberance to extreme despair with these hard bounces. >>
Again, don't know what you're talking about. Based on what?
I can't see any extremes whatsoever, and I don't see these bounces as being particularly hard, either. If there were any sort of extremes of exuberance and despair, you would expect to see those sentiments reflected in sentiment indicators. I just don't see that to be the case.
For example, the CBOE Equity put/call ratio indicates something quite different. The spot readings lately have been in the 0.45 to 0.55 range, and the 21 day moving average of the CBOE put/call has steadily dropped into bullish territory, from the mid- to upper-60s a month or so ago, to 0.52 today. This is a clearly bullish indication, and is not at all consistent with extreme pessimism.
That said, there appears to be some mixed sentiment signals as well, so you have to take the above with a grain of salt. For example, the relative flows of funds into the Rydex bull and bear funds has decidedly bearish implications at the moment, while the OEX put/call is neutral. OTOH, this week's Consensus Bullish Market Opinion of futures traders has taken a strong trend in the bullish direction, moving sharply up from readings of about 20% 3 or 4 weeks ago, to 56% this week. This is another fairly strong bullish sentiment indicator, which reflects the sentiment of futures traders (usually considered to be a very savvy bunch, and ahead of the curve).
Collectively, I'd say the sentiment indicators do not indicate a consensus sentiment by the market sufficient to power a strong trend in either direction, and might therefore be best viewed as most consistent with a somewhat uncertain, rather conviction-less market, but with a distinct bias to the upside (based on the CBOE put/call and the Consensus Bullish, which I view as more powerful sentiment gauges).
Another thing: On the NDX chart, you can see from the MACD that there is now a bullish divergence forming: the MACD signal line has crossed up through its ema, and the histograms are positive, despite the index continuing to make new short-term lows. This has definite bullish implications.
stockcharts.com[l,a]daclyymy[pb50!b100!b200][vc60][iUb14!La26,12,9]
Whether these bullish indications can really gain any kind of momentum remains to be seen. In the short term, I see the NDX moving upwards, into the area of heavy resistance defined by the downtrend line and the descending long-term moving averages. This area has turned back previous advances very sharply, and there will have to be a substantial increase in momentum forthcoming before these areas are tested successfully. However, I think a short-term reversal, and an uptrend toward a test there is a likely possibility within the next 1 to 3 weeks.
JMVHO.......
Walkingshadow |
