Somewhat suprisingly, the S&P 500 hasn't made any real progress in either direction since April 23rd. It's been a period of quick, tantalizing moves, but ultimately prices have ended up going sideways over the past 11 trading sessions. The Volatility Index (VIX), measuring the implied volatility on S&P 100 (OEX) options, has also gone sideways.
In my experience, this is the kind of market that can chew you up, regardless of whether you're bullish or bearish. It's tough to have conviction on either side right now. Both bulls and bears are nervous. This hourly chart confirms that both camps are skittish.
Since the VIX lost momentum to the downside on April 23rd, the market has had numerous opportunities to cycle into a real decline phase. And it just hasn't happened yet -- not to the degree we need to call a mid-term trend change. While we did see a "spark of fear" in the VIX on the down open on May 1, too many traders shorted that opening drop and VIX spike -- and the market promptly blew out those short sellers and put buyers who jumped in too quickly.
Without a genuine "spark of fear" -- and a daily close higher than the open on the VIX, producing a convincing white candle on the daily chart -- then the market can easily make more headway to the upside. It's too risky to have your money in bearish Rydex funds without the bullish majority really feeling squeezed by their long positions.
Most are familiar with the concept of a short squeeze, when the shorts cover in a rush when the pain of seeing a position move up against them becomes unbearable. But this can also happen on the long side. A "long squeeze" happens when the bullish majority feels the emotional pain of the market moving down against their positions. There are also few shorts around to prop up the market on the way down by booking profits (buying to cover).
So while we're close to the point where we can call that a long squeeze is underway, it just hasn't happened yet. You know how I feel -- a long squeeze is way overdue -- but I can't make things up that simply aren't there. So while we may indeed "back into" a sell signal here on a further drift down, without some emotional selling pressure it's likely going to be tough to make money on the short side.
It will be tough on the long side, too. There are too many bulls already in the market to support a big run higher, yet they are not on the run quite yet. Yesterday was a prime opportunity for a high volatility break to the downside, and it just didn't happen. So far it looks like we're on a gentle corrective path, which may push the SPX back down towards 900 or so -- but if it keeps going like this it's going to be tough on both longs and shorts.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: The tank filled up by a fraction of a point but remained at 9% full of negative sentiment on Thursday.
SHORT-TERM: The hourly gauge remains in a neutral condition with a decline-phase bias.
MID-TERM: The mid-term gauge progressed fractionally to remain at 5% in its decline phase. The Confidence Diffusion Index (CDI) also remained unchanged and on the wrong side of 0 at a bullish 1.
LONG-TERM: The weekly gauge remained unchanged at 98% in its advance phase. Our weekly CDI also remained unchanged at a bullish 2.
BOTTOM LINE: The market is overbought, at resistance, and too bullish for its own good. (If I hear one more talking head on TV refer to the "positive tone" in the market I may have to scream.) We have every indication that we're ripe for a pullback. And indeed on Wednesday and Thursday we saw a mild one. However the dip has had virtually no effect on the tank, which remains under 10%. The dip has been roundly proclaimed as a buying op, and I don't think Davy Crockett could find a bear in these parts.
The last little spike in the tank (black arrow) brought out the buyers. The bears are hibernating. The extreme complacency on the dashboard is a down leg waiting to happen. IF (IF IF) that down leg does not happen, however, then there's a blowoff top/short squeeze that could get truly vomitous for the bears. (I bet there are a lot of buy stops on short positions up over SPX 965. And I figure there are some bulls eyeing those buy stops and licking their chops.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
#forex4u - chat forex MIRC
O Clubeinvest.com informa que nenhuma da informação
aqui facultada deverá ser entendida como conselho ou recomendação
de qualquer tipo de transacção ou investimento.
