Figure 1, a weekly chart of the S&P500, is the "Dumb Money" indicator. The "dumb money" looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio.
Figure 1. "Dumb Money" Indicator
The "smart money" indicator is a composite of the following data: 1) public to specialist short ratio; 2) specialist short to total short ratio; 3) SP100 option traders. See figure 2.
A 9% drop in the S&P500 over the last 10 days qualifies as "very oversold", and with this in mind, there is a high likelihood of a "bounce" especially since prices are testing their November, 2008 lows. The bulls are counting on it. Nonetheless, the sentiment data suggests that there are still too many bulls on the wrong side of the trend for any meaningful bottom and sustainable rally to develop.
No comments:
Post a Comment