Here are the complacency indexes:
ST Naz CI: 79.28, down from 82.4. Reversed back down again. Overbought. Bearish. Lots of whipsaws lately, as it moves up and down. Keep in mind that it continues to be in overbought territory (above 70). In other words, high complacency. So if it appears undecided in its whipsaws, don't be fooled: It's overbought and will eventually head down. I wonder what AMAT will report after the close Tuesday, and Dell after the close Wednesday. One scenario is that the outlook will be bleak, and the techs will head strongly down. With options expiration and max pain to consider, one wonders. Another possibility is good pro forma (imaginary) numbers and an encouraging outlook, followed by a strong temporary bounce in techs to deliver max pain. Complacency would head briefly into the high 80s or 90s, suckering everyone in, and then the Nasdaq would revisit 1940 and under. The upcoming FOMC meeting is yet another factor to consider. So many crosscurrents, huh? I'm sure someone could dream up a truly bullish scenario, too, with a sustained rally. In that scenario, the complacent would be well rewarded. It's certainly possible. Anything's possible.
LT Naz CI: 86.7, down from 87.6. Small move back down. Overbought. Bearish. The Naz CI is overbought in the short and long term. That should give pause to anyone expecting a sustained rally here. Technically, it's true that a lot of charts appear to be oversold. Prices seem to be hitting and bouncing off the lower Bollinger band. Lots of indicators, such as stochastics, look oversold, too. How many times have those indicators failed you during the bear market? The fact is that support levels have failed, and investors remain complacent. It's my hunch that a lot of technical analysts relying on oscillators will be fooled by individual charts into buying here, thinking we may have hit bottom. It's also my hunch that we haven't hit bottom. But what the heck do I know? I could be totally wrong.
ST S&P CI: 91.6, up from 78.9. Flight to quality? With most stocks overbought and complacency so high, what quality? Bonds? Yes, the S&P CI has moved back up, and a reversal to the upside is bullish. But it's not from oversold levels. In fact, it's back in the 90s -- way overbought -- after reversing from a lower level that was still overbought. So if I were going long, I'd be really cautious. But I'm not going long.
LT S&P CI: 88.2, up from 84.4. Overbought. Remember, complacency is a contrary indicator. If everything looks too good to be true, it usually is (but not always). Look at the low for the Dow today: 10,197. It broke under 10,200 ever so briefly. It'll probably test that level again, and it might just fail the second test. Among the reasons for the rally in the Dow today was that it bounced from 10,200, I suspect. A lot of investors were watching that level. But it was a bit of a close call, and I don't think it's out of the woods yet. How's that for mixing metaphors?
All in all a bearish report, but as I say all the time, I have no idea where the market's headed. Only gurus know, and I don't think you'll find any of them on this thread. This is the post you've made the mistake of reading now, but there are millions of other posts, and millions of other viewpoints. Mine could be totally wrong. |
