Saturday, July 22, 2017

Don't Get All Sentimental

Our proprietary model of bullish sentiment across a wide range of market participants absolutely soared this week - jumping almost another five full points in one week to the highest level for all of this Primary Vth wave high.

Weekly Bullish Sentiment

The weekly percentage of bullish investors jumped to 61.2% from 56.4 %, which is amazing of itself but it also eclipsed the prior Primary V wave high at 60.9%. For those of us that watch this on a week to week basis, recording a string of eight weeks above 55%, and then seeing this, it is amazing to watch. The biggest jump in sentiment came from the mom & pop investors who "threw in the towel" on the bearish case and whose bullishness jumped seven points in a week! But there was also a rise in bullishness among professional investors and newsletter writers, as well. Pretty remarkable.

Of course, we view such one-sided sentiment as a contrary indicator in the long run, and attribute it to the power of the Minor 3 wave to sway opinion. When added to the wave counts shown  yesterday, and in the weekend video, along with the low trading volumes being experienced it adds to the case for caution in upward wave counting at this time.

But, there is further evidence, as well. Barron's magazine reports that Corporate insider transactions - those company officers and directors who must report transactions - are now skewed 62% to the sell side. (This is the ratio of Insider Sells to Buys). So, someone who knows something is selling at one of the fastest clips in recent history. It is interesting this occurs in conjunction with this sentiment high.

Well, sentiment is good, you say, but it is price action that determines gains or losses in the equity market. Is there any price evidence of concern while the major markets are near their all time highs?

To that end, we'd like to show you this chart of the Russell 2000 Index. It has a price bar not seen anywhere else on this chart - that of a "key reversal day". That is a day when prices first trade up through their all time highs - making a higher high than the previous day, then turn around and trade lower than the low of that previous day, and finally also closing lower than it, as well.

Russell 2000 Index - Key Reversal Day

This candle comes after prices may well have traded up into the triple zigzag we cited as possible in a prior post. The triple zigzag would be the minute ((b)) wave above, indicating that a steep wave ((c)) decline should begin to end the Minor wave 4. Triple zigzags are very rare birds indeed, and we wouldn't call this one except for the uncommon parallel nature of the price movement within. Price just peeked above that upper parallel, in what Elliott analysts call an "over-throw", before being smacked down back inside the channel again. Price movement down outside of the channel should well indicate that minute wave ((c)) is underway.

Well. Have a good weekend.


  1. Hello Joe,
    Let me start with thanks for your tireless work.
    In your last weekend video you have a monthly chart of the SPX showing the targets for waves 4 and 5. I wanted to ask if you would publish it (or a link to it) in the blog form so it can be downloaded as a stand alone.


  2. You beat me to the punch PT. My sentiments exactly. The sheer amount of work and detail in TJ's work is amazing--plus the fact that its gratis! I just can't help saying how much your work is appreciated. Thanks!

    1. Very welcome, Rose. And much thanks for your continued visits!

  3. Thanks for the update on the Russell ET. If the count shown is correct wave 3 is about 190 points. Wave 1 is longer than 3 which would mean wave 5 should be shorter than 3.

  4. Thanks for taking the time to put these charts up Joe. It took me years to find an honest and knowledgeable EW analyst that knows what he's talking about. Cheers to you sir

  5. Thank Joe. If on the other hand we continue to rally next week on the RUT then this would be a confirmed breakout of a range that has held throughout the year and would seem quite bullish. Would this alter your count significantly?

    1. True but may happen this week. Not far off.

  6. I bought a SPY Sep OTM call on Fri, and a Aug SPY put near-the-money. All I want is a big move in either direction over the next week or two. I'll even take a continued slow melt-up.