Weekly Sentiment Review
When the overall sentiment backdrop is in neutral territory, it is usually not the driving force in the market. At such times, other factors like market fundamentals or the technical picture are usually more helpful in guaging the near-term direction of the market.
Currently, I would look for fundamentals to move to the forefront. Earnings season is right around the corner. First, we have to get through which companies are going to warn of an earning shortfall. These events are a gift if you're lucky enough to be short, and a nightmare if you're long the stock. Then we will get into the heart of earnings season and see which companies are still humming along.
In any case, here's where some of the sentiment indicators stand:
- The bull/bear spread in the Investor's Intelligence survey rose to +36 (55% bulls, 19% bears); that's a very low number of bears
- The bull/bear spread in the AAII survey fell to +16 (46% bulls, 30% bears)
- Short interest ratios are still elevated (Specialist Short ratio)
- Put/call ratios are still in neutral territory (10-day CBOE, ISE)