Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Sentiment Getting Up There...Not Yet At A Total Sell Signal...Caution For Now....

Stock-Markets / Stock Markets 2013 Feb 07, 2013 - 10:25 AM GMT

By: Jack_Steiman

Stock-Markets

When sentiment gets up to these levels you have to take notice and ask yourself about how much more upside there is before things come down hard. Historically it takes 40%, or slightly above, before a bear market starts for the short-term in order to unwind. In 2007 we saw it reach 42.5% before the crash in the stock market, and the same crash happened in 2011, with a 41.6% reading. We're at 33.6% with bears still above 20%, although real close at 21.1%.


In other words, we're not at deaths door for the market, but the caution flag should go up telling you it's fine to be involved a little bit with the uptrend. But don't get overly involved because we run the risk of a big swoon down to unwind at any time. Unwind sentiment that is as the markets themselves are no longer overbought, although they have been over and over again for quite some time, which, of course, is what has caused the bull-bear readings to get this elevated.

So we observe the fact that the bulls are getting frothy here, but that is by no means a sell signal at 33.6%, and thus, shorting is still dangerous for the time being. Don't get sentimental over the sentiment. Keep in mind the overall trend is still higher, and even though we're getting up there in sentiment, you should not look at this market from a bearish perspective. In addition, when the bull-bear spread does get higher, if it gets higher, I should say, topping is still a process. The bulls have learned to buy weakness these past several months, and, thus, there will be a lot of whipsaw up and down, even when we actually do top out. I'm not talking about a pullback type of topping out. I am talking about a sever-correction type of topping out. Observe and react. Understand the need for caution. Also understand the need to still be a bull, bigger picture.

It's very interesting to note how the daily index charts are no longer overbought. The whipsaw back and forth over the past several days has done a solid job of unwinding things. That's what happens in bullish environments. The market finds a way to unwind without killing price. So far so good, thus, the door is open to somewhat higher prices, if the bulls can gain enough momentum. Some RSI's are down into the upper 50's, which is a whole lot better than staring at 70+ all the time. It does get on your nerves, because you know it has to unwind at some point. If the market holds well over the next several weeks, including even if we get a small move lower first, the bull-bear spread will reach the first big red flag at 35%. But it would take a move probably near 1600-1650 on the S&P 500 to get that level to the critically dangerous level of 40%. So, for now, the indexes are no longer overbought. That's at least a good thing for the very short-term, but with readings this high on the bull-bear spread, a natural small-to-medium pullback can occur at any time.

The S&P 500 has resistance at 1525. After that roughly 1550. The old high was at 1576. I don't think we"ll get there, but you never know. You stay with the trend in place until we see technical evidence that the uptrend is truly over for a while at the least. 1500 down to 1490, and then 1470 is great support. Those levels should keep the bears from getting overly aggressive for a while longer, but a natural test back to 1490 can always occur. As I've said repeatedly, there's more risk in the market here, but we're not at extremes on anything, so nothing earth shattering to the down side should take place quite yet.

Stick with the trend, but be appropriate.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Sign up for a Free 15-Day Trial to SwingTradeOnline.com!

© 2013 SwingTradeOnline.com

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in