Sunday Sentiments

Here are a few charts to have a look at this Sunday, intended to be more thought-provoking than necessarily definitive. And so there are a few questions to ask oneself.

Proprietary Sentiment Model

Why did the percent bullishness leap by more than four full points last week - in one week alone, and what does it mean for market direction? Is the possibility of a 'revenue neutral' tax reform plan really that bullish for individuals and companies? And has or hasn't the market fully discounted such a tax plan - if it happens - anyway? Isn't that what the supposed 'Trump Rally' was premised on?

NYSE McClellan Oscillator - Daily

Why is the McClellan Oscillator diverging with Friday's new all time high stock prices? While not a highly reliable indicator in itself, the pattern is certainly interesting at this point in time.

Daily Bullish Percentage of the S&P500

Why is the percent of stocks in verified bullish uptrends on point-and-figure charts double-diverging from Friday's all time high prices? This doesn't mean more stocks can't turn bullish, but the statistic is interesting at this point in time.

ES E-Mini S&P500 Commitment of Traders

Why are the number of long positions owned by "large speculative' market players - those that are usually "trend followers" at a new recent high? Meanwhile commercials have switched to net short.

Finally, people ask about the Wilshire 5000. Here is a chart below with a possible count that would synchronize the major indexes.

Wilshire 5000 Daily - Potential Expanding Diagonal

People see the recent August decline, and how it is a larger decline that overlaps other waves and  they tend to 'give up' on counting it. But the Wilshire is the only major index in which waves (2) and (4), as shown, do not have higher b waves and may be considered zigzags allowing the count of a potential expanding diagonal. So, in this case, waves (1), (3) and (5) would all be three-waves in nature.

Now, the information in the first four charts is just that. Information. The potential count in the last chart is an 'intentional effort' to synchronize some major indexes in time. Is this chart and it's message correct? Heck if I know today. But, it appears to be a valid way to count. And, the key point about the Wilshire - like many 2000, 3000 or 5000 stock indexes is that they will likely be "downwardly biased" by the weaker stocks in the index. Meaning, "near a top some stocks must rotate into a more weak position". This evidence can be seen in bullish percentage chart above. That's what would be the 'cause' of the (B) wave in the Wilshire.

Is a bearish view on U.S. equity markets correct at this exact point in time? Nothing is for certain. But the above information gives a rational person something to consider, instead of only letting their animal spirits roam. And, oh, yeah, there sure are a lot of down side gaps, and none currently above the market. All-in-all some warning signs to ponder and hopefully to keep one open-minded and flexible.

Have a good rest of the weekend.
TraderJoe