Last week's perfect alignment of the sentiment indicators has led to the expected bounce, but buying conviction remains a big question as volume was the lowest total for any week since Christmas, 2009.
The "smart money" and company insiders were buying, and these sentiment indicators have turned neutral. The "dumb money" remains bearish. However, the big question remains: how much conviction (and sustainability) is behind this bounce? If volume is any kind of tell, then one would expect this move to fizzle out like the prior (short covering) bounces over the summer when there were too many bears. Yes, it was a holiday shortened week (Labor Day and Rosh Hashanah), but volume on the S&P500 (symbol: $INX) came in at less than 50% of the prior year's already diminishing average.
For a broader look at the significance of a bullish signal from the "Dumb Money" indicator, please check out the following article from March, 2009: "Putting a Bullish Signal Context". The current bounce has followed the expected script.
insiders decided that their money was better spent on enjoying the Labor Day weekend as the number of companies with buying fell more than -35% and the number of companies with selling increased nearly 18%."