As many long-time followers of this blog know, many years ago - unsatisfied with readily available sentiment indicators - I developed my own and began to track it weekly. As the chart below, shows my proprietary Bullish Sentiment Index has now dropped to the lowest level since the pandemic low.
Although I follow this measure weekly, there is a lot of unimportant data as the market has been making new lows. Therefore, I have been reticent to publish anything about sentiment until it began showing characteristics more in tune with the nature of a bear market. It is now doing that. There are a few things to note.
- It is Mom & Pop that have been correct on the drop. As measured by the AAII Index component of this overall sentiment ranking, they have been the most cautious sentiment group for many, many months now.
- As of just the last three weeks, it is now the professionals and the newsletter writers that have been throwing in the towel.
- The boat is becoming more loaded on one side. When situations like this occur, it often signifies that a turn is due. Not here, but due.
The CNN Fear & Greed Index is also buried in "Extreme Fear" at a level of 15! This, too, is a short-term warning sign.
Somewhat still indicating the trend lower can continue, the VIX is not yet at extreme high readings and the CBOE daily put-call ratio is not even close to residing in the Zone of Despair (above the 1.00 level) as compared to the Zone of Speculation (below the 0.50 level). The last reading was 0.77, and the 1.00 level was only hit once in the last several days.
Remember, one makes or loses money on price & price alone - not sentiment. Therefore, the purpose of this post is just to ask blog readers to be on guard to be especially flexible at these levels of sentiment. A nasty turn can come at nearly any time now.
This is the second post this weekend. The first one may still be the more important. Have an excellent rest of the weekend.
TraderJoe
So back in mid June the 2 year took a break, (June 15th) 2 days later the SPY took a break. It did however take a whole month for SPY to break above the 50 day and start making higher highs.
ReplyDeleteET Thank you for your work!
Welcome, Bill. TJ.
DeleteES daily - now there is another outside day, up, (currently). Whippy, whippy.
ReplyDeletehttps://www.tradingview.com/x/6sPXHloA/
TJ
This is what I have for a ((5)) = ((1)) count.
Deletehttps://www.tradingview.com/x/NYPEyLhI/
TJ
SPY 5-min: at this point there could be no harm in being 'aware' of a possible alternate red count, because the time frame of the current up waves is so short (i.e. 5-min).
ReplyDeletehttps://www.tradingview.com/x/8IsAoBY0/
A new higher high would be needed. The previous 0 - ((4)) trend line because the new red 0 - ii trend line.
TJ
trend line because => became ?
DeleteYes. TJ.
DeleteWhy don't you edit your original & delete my post?
DeleteSpx cash and Spy still embedded bearish but I think ES got over 20 today on the slow stochastic? I have to see what Ira says about it. Thanks for the updates 👍
ReplyDeleteDo you know what settings Ira uses for the slow stochastic? I've briefly tried to reverse engineer them with no luck.
DeleteThe EWO (AO) suggests two wave cycles so far: i - ii and iii - iv, with v yet to come. Can that indicator be used (in many cases) to refine the determination of waves?
ReplyDeleteWe have end-of-quarter inflows to index funds going on (forced buying), probably also inducing some short covering, so I have been expecting a fairly strong technical rally. This should be the (iv) wave with (v) to follow, completing the 'A' part of your expanding diagonal 5th wave. That ties in well with your sentiment indicators (very negative, getting ready for a surprise rally with legs).
Yes. That is the red count shown in previous comments. TJ.
DeleteIs 3 the shortest wave in your upward red count now thus invalidating it? Is new count and or impulse? Thanks
DeleteAlso since 9/23 there is a clear expanding triangle correction upward
Deletesee below @1:13 pm. TJ.
DeleteES 30-min: here is the 'typical' ES intraday wave-counting screen. Price seems to be finding some resistance at the R2 daily price pivot. Let's see if that holds for the day or not. The most important item is to watch the lower parallel trend line.
ReplyDeletehttps://www.tradingview.com/x/ryfFkCSn/
(Intraday fractals have been hidden for clarity).
Right now, I can only count three-waves-up. That could change! Be exceptionally flexible here. As marc said, it 'could be' part of an expanding triangle fourth wave. Or, it could be just a-b-c to (iv). We simply don't know yet.
TJ
..downward correction from the high is now the longest correction in price since Monday's up turn. This 'could signal' a change in degree (unless a triangle were to form - but there is no sign of that, yet).
DeleteTJ
thanks tj
Deletelongest correction could also mean possibly looking at another move to around 4000 spx - correct? correction is just B or X ?
Deleteyes, 'possible'. Here are some things to watch. The key is whether the truncation holds or not.
Deletehttps://www.tradingview.com/x/ERIx9yjY/
TJ
'warning' first attempt at parallel broken upward. TJ.
DeleteES 30-min: for whatever reason, a triangle was indeed formed to overcome the potential degree concern. We'll see what it might mean tomorrow. Keep in mind that a 38.2% retrace of wave (iii), down, is about 3,805 - 3,810, up. So, I would not expect wave (iv) to travel much further than than 3,825-30 or so,
ReplyDeletehttps://www.tradingview.com/x/Ux9WVaRw/
TJ
Some short stops likely taken out at the very end of the day. We're also still under 18ma on daily ES at around 3825.
ReplyDeleteA new post is started for the next day.
ReplyDeleteTJ