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Market Sentiment

Wednesday, January 02, 2008 | 03:00 PM

in Contrary Indicators | Markets | Psychology/Sentiment

As the indices accelerate to the downside -- the Dow Industrials are off 240 points as I type this -- its as good a time as any to look at the current market sentiment.

These provide a snapshot into when traders and investors get too greedy or fearful. Typically, you can use these measures as a useful short term metric for timing entries and exits.

And, these data points are much more reliable than the typical anecdotal sentiment discussions: "markets should selloff (rally), 'cause everyone I know is bullish (bearish)."

CBOE Equity & Index Put/Call Ratio

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AAII Investor Bullish Sentiment Survey

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AAII Asset Allocation Survey

What do these charts suggest?

This sentiment data implies that bearishness is getting very negative. Its not at the point where a rally is absolutely imminent, but we are slowly moving in that direction.

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Here's our full report today: (click to open the full PDF)
Fusions_Analytics_Equity_Market_Review_Jan_2nd_2007.pdf

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Go to the Fusion IQ home page , then select Subscribe. On the signup page, you will see a line that says Discount Code -- enter "BIGPICTURE07" and click on update. The first 30 days trial is free, but you will need to enter a credit card number -- as long as you cancel before 30 days hence, you won't get billed.