Folks Are Bullish, but Will That Be Enough?
The indicators show that investors are giddy, but will their excitement be enough to make the market move higher?
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For at least a week now, I have been saying I don’t think sentiment is too giddy. It has been my belief that as long as we’re still debating Recession or Soft Landing, it’s hard to see folks getting giddy. But perhaps I am wrong.
Last week saw the Market Vane Bulls notch back up to 70, something we had not seen since July. (Recall I thought we were giddy in July). So once again, this indicator says folks are too bullish, although not as much as last summer’s reading of 73.
We’ve been discussing the put/call ratios, and their ten-day moving averages are getting awfully low, too. Monday’s reading was .92 which is the highest reading in two weeks. The ten-day moving average is not in the mid-70s, as it was in November 2021, or even the low 80s, but it has slipped under .86 for the first time since July.
Last week, the CNN Fear and Greed Index was just ‘this’ side of Extreme Greed, still hovering in Greed. But on Monday it slipped into Extreme Greed by a hair. This is the highest reading since early March.
And it makes sense that folks are the most excited since March. How many charts have we looked at that do not resemble the S&P? How many charts have we looked at that peaked in the first quarter of the year? Just recently I highlight the chart of IGV, noting it had peaked in February and was finally making a new high. So yes, it makes sense that Fear and Greed is back to levels not seen since the first quarter.
Later this week we’ll see what the surveys say, but it really is possible I have underestimated the level of bullishness out there.
In the meantime the late day surge did a lot for the indexes but not so much for breadth. There wasn’t much selling even when the indexes were lower midday but that late day buying was heavily concentrated in the indexes. Net breadth on the NYSE was +200 and net volume was slightly negative.
Here’s the curious part: the McClellan Summation Index went from needing -300 advancers minus decliners on the NYSE to turn back up. We got +200. Now we need -100 to turn it back up.
Sometimes it’s just the math, but other times, it is part of the overbought condition. We manage to creep up but with an awful lot of churning around. So the up days don’t help until you can get back to an oversold condition.
I like to think of it like a broad jump. If you stand at the line you can only go so far. But if you step back and get a running start, you can go farther. A running start would be helpful.
