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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Jeff who wrote (4380)	7/30/2002 6:39:54 PM
From: Lone Ranger	Respond to of 30712

Jeff, Some sentimental analysis. schaeffersresearch.com A Sentimental Wish List 7/30/2002 2:41:07 PM The market has been rallying sharply. It's not that big of a surprise. The CBOE Market Volatility Index (VIX – 34.66) hit 56.73. Investor's Intelligence bears outweighed bulls for two weeks running. Al Michaels was on television bragging about the killing that he was making shorting stocks. The Wall Street Journal ran an article entitled "Manias, Panics and Crashes". Needless to say when sentiment gets this extreme, experienced traders should start positioning themselves for a turn. What did I do? I spent the morning of July 24 closing out my open put positions. Did I manage to get any call exposure out the door to benefit from the huge reversal? No. Have I spent a single second doing the woulda, coulda shouldas? Nope. I was willing to give up positioning for the turn around in order to get the maximum bang for my buck on the decline. Sometimes you miss opportunities, and that is a part of trading. This 1,213-point reversal has been swift, with the majority of the move coming in just two trading days. So what am I expecting as far as this countertrend rally goes? Let me preface this list by saying that I am not psychic, and in no way know for sure what the market will do, but here are some things I would like to see in order to start aggressively shorting this market. The VIX in the 23-to-25 neighborhood. This would be a good indication that some complacency has crept back into the market. Investors Intelligence bulls back above 50. Lots of talk in the media about a newly developing bull market. You've read it before. The stories that read: With the market trading 20 percent off its lows, many strategists see a new bull market developing. Etc. The Industrials back in the 9400-9900 range. I realize this is pretty wide, but hey, we've been doing 400 points in a day recently. The 21-day moving average of CBOE equity put/call ratio back below 0.55 (it currently stands at 0.70 after just recently reaching 0.76). These are just some of the things that would suggest that optimistic sentiment has taken back its hold on market participants. After decades of bull markets and just two years of bear, they are an optimistic lot. Whether or not these items come to pass remains to be seen, and I'm sure there will be a lot of tradable volatility in between. However, I am firmly convinced that sentiment analysis is the missing ingredient to many traders' arsenal and hope that reading this website provides traders the additional edge necessary to improve their trading.