Category Archives: Sentiment

Sentiment Extremes Warn of Likely Correction In US Equities

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One of my favorite indicators for identifying potential corrections in the stock market has just triggered the 4th extreme reading of below 0.60 on the Put-to-Call Ratio in what I refer to as a cluster of readings (a series of sub 0.60 readings that occur in relative close proximity without a substantial correction while the stock market is moving higher with each successive reading).

$CPC chart

Total Put/Call Ratio

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Bonds: 90% of You Are Herding

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90% (my low-balled estimate) of you, the investing public, are herding when it comes to the bond market.  You may not know it because the overwhelming psychological atmosphere is to reaffirm, not question peoples’ behavior.  That is what herding is; a comforting feeling of going with the flow and being at one with your environment and the greater zeitgeist.

Now, please don’t be offended by the title; you dear reader may well be one of the 10%.  But out there in the financial investment realm, they are herding, BIG time, as bond yields are expected to continue rising, because… media; because“Great Rotation, part 2” and because… the story of epic secular changes and the chance to be early and clued in to a great new market phase are so alluring.

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Vix Analog

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As the VIX got pounded back into the sub-teens today, it occurred to me to compare the present activity to the period preceding the financial crisis. What I found was interesting. The chart below (click it for a much bigger version) shows 2003-2007 on the top and recent history on the bottom. You may notice a lot of similarities between the top and bottom, and I’ve drawn a red line at the top showing the equivalent of “right now”.

1024-vixcompare

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The Sky is Not Falling Yet (by Avi Gilburt)

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First published Sat Oct 1 for members of ElliottWaveTrader.net:  This past week, I have been sent several “stories” that the dollar is going to absolutely “crash” on September 30th, which will supposedly cause metals to rally to the moon and beyond.  And, as I have noted in my Trading Room oh so often, we have had so many such “stories” in the past, and we will no doubt have many more in the future. But, “stories” are not what drive the market, despite the common erroneous belief to the contrary, as the sky did not fall this past week, and neither did the dollar.

Then we had further “stories” of Deutsche Bank crashing and taking the world financial markets down with it.  And, once again, all the “safe haven” gold addicts were harping about how gold was going to soar on this news.  While more and more bad news was coming out about Deutsche Bank this past week, more and more were calling for not only the collapse of the company, but also a crash to the markets and a moon shot for gold.

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