Sentiment Review
The market is still lower so far today, pressured by a combination of spiking oil (+$3.50 to $65.5) and skittishness ahead of the FOMC meeting. PIMCO's Bill Gross said he thinks there is a chance that the Fed pauses tomorrow. But I am not so sure.
So market sentiment today is cautious, and so are the indicators that I follow. Some of the advisor surveys ticked higher (i.e.- more bullish), but are still off peak levels reached earlier this year. And the short interest indicators are still elevated.
- The bull/bear spread in the Investors' Intelligence survey rose to +26 (53% bulls, 27% bears)
- The bull/bear spread in the AAII survey rose to +22 (51% bulls, 29% bears)
- The Specialist Short Ratio is still very low at 0.17
- The Rydex Nova/Ursa ratio is also still low at 0.19
I am still focused on the large level of short interest in the market, despite the S&P 500 closing 8 points from a new high on Friday. While there could be some volatility around the FOMC meeting tomorrow, if the market breaks out to new highs this week or next, I would expect a flurry of short covering.
posted by J. Kahn @ 10:33 AM
3 comments
3 Comments:
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Any thoughts on what the reaction will be either way? It seems to me that bank stocks hang in the balance here. If the Fed pauses financials should rally, but what if they raise rates? Will money flow into GIS, PG, BUD and the like?
Kevin,
I think the market reaction tomorrow is a coin toss. The language is probably more important, in terms of whether they can sit on their hands for a while, or do they think they need to continue at a "measured" pace.
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