Investor Sentiment is Finally Turning Pessimistic
Looking at two key sentiment surveys, we finally see a bit of a change. Investors are turning worried.
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The Market
Well, that was one of the crummier rallies we’ve seen. Small caps closed on the low of the day, and even among tech stocks, it was mixed. Several semi stocks were flat. Breadth, overall, was not great, and many stocks closed at/near the low of the day.
Okay, enough complaining. Now let’s talk sentiment.
The AAII Bulls fell to 28.8%. That is down ten points in a week. It is also the fewest bulls we’ve seen in a year. The bears surged to 53.3%, which is the highest reading for the bears since the Tariff Tantrum.
Now I think I need to stop and explain why I am fussing over the AAII survey when we all know I think it is a terrible survey. I am fussing because the voting for this goes through Wednesday evening (around midnight), and therefore, I think it gives us the freshest look at what we saw in terms of the change in sentiment this week.
Then there are the good folks at NAAIM. Recall four weeks ago, when everyone was on board with the broadening out trade and the S&P was kissing 7900, these folks went on margin with their exposure topping 102.
Fast forward to today, and they have taken that exposure to the market down to a fraction under 72. That is now the lowest reading since the spring lows. Sure, we got to 60 back then, but if you are looking, as I am, for a change in sentiment, then this is one.
And I can tell you it may seem anecdotally folks were excited about the rally today, but the put/call ratio was .90, which tells me an awful lot of folks felt what I observed in the first paragraph: the rally was nothing to write home about.
Earlier this week, I said I would like to see a rally and another trip back down. We’ve had the rally, so another trip down or even a pullback tomorrow would be good. We remain in a choppy market, so we are just trying to play the swings.
New Ideas
Down below, you will see someone asked about Cipher Digital (CIFR). I think Rigetti Computing (RGTI) is in the same group, and the chart has gone nowhere, almost the entire year. If you want to speculate in this sort of stock, the risk/reward is pretty good since under yesterday’s low, and you’re wrong.
Today’s Indicator
The ten-day moving average of the put/call ratio is not showing a big sentiment shift, but it is rising. If we get a few more down days and therefore readings over .90 we might just get this to the upper 80s/low 90s.
Q&A/Reader’s Feedback
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Teradyne (TER) hasn’t done anything since the spring, so the question is if it is a giant consolidation before breaking out to the upside. There is so little life in the stock it is hard to tell. For now, I will call it a trading range between 300 and 420. I would be bearish if it cracks under those summer twin lows (300-ish).
I would love to see Amazon (AMZN) take a trip back into that 240 area because the stock, for the last seven weeks, has been a series of lower lows and lower highs so it feels as if that gap below beckons. The alternative is a rally to 255-260 that comes back to say 250 and maps out a better pattern.
Cipher Digital (CIFR) is trying to form some sort of a bottom. I think it can rally to that 19-20 area, and then I’d like to take another look at it since there is a lot of resistance all the way up.
