Today is Thursday January 14th, and we have some new developments in sentiment to report.
As you know, I have watched the market sentiment numbers pretty closely and it has not given an extreme reading since the March lows. One side of the market is at an extreme reading now and has been there for several weeks now, but the most important numbers to watch is the bullish readings.
Currently, after having come off substantially the week before, the numbers came all the way back and then some. I am very confident that when these numbers reach an extreme, you had better hold on, because the volume and market volatility is going to come back and it will not likely be to the upside. We may still have some to go.
Currently the bullish numbers are at 53.4% up 5.1%. That is a big move for one week. The bearish numbers are at 15.9%. This is a 9 year high, as best as I can see. It was not until back in 2001 that so few people were bearish. What do you think that is saying? Well, let me interpret. The majority is never right for very long, lets just leave it like that.
These numbers work in the opposite direction. Isn’t that strange? If you understand how Trading Price Action works, you would think it is really quite normal. The market takes you up, so that it can take you down and visa versa.
It is possible that we could see numbers as high as 60%. If we do, that is a super strong reading. Anything over 55% is considered the danger zone for a Major Turing Point and it could be coming soon.
We are in a Rising Wedge on the S&P 500 Index and if it gets broken, there is a statistical percentage that the market is going to go down with some significance. That is just how it is and how it works. We are in a pressure cooker, that is for sure and I can see it as plain as day. There are so many action points for traders when the market starts to roll over. Let me put it another way, we all know about the game of domino’s, right. OK, we keep setting up domino’s with each passing day and week and month go by. The longer this rally continues, the more painful it will be for those caught in the down draft to adjust themself and their portfolio.
I don’t have any answers, but, this is what I saw happening 9 months ago. We were going to trade back up to the middle of the range and at some point, the dam would break. We all had better stay clear of the path of the water and make preparations. If it does not happen, that is great, but I know of no other way to work off the excess optimism other than a decline.
We may have more to go to the upside and that would be a good thing for others to get a better price as they prepare to sell into strength. OK, that is it for now on that. I was a little surprised that the numbers snapped back so strong. Wait and see for now.
I will have to take a rain check on the post I mentioned about yesterday, Fear and Greed. It is a topic I will share my thoughts on in more detail. I will try to put it out in tomorrow’s post so it could make for interesting reading over the weekend.
Todays trading, was OK, but back to very slow trading. At 12 pm West Coast, there was just 1 million contracts traded. That was half of what Wednesdays volume was. There was some nice trades in the morning for anyone trading then, but mid day it got very boring and slow. I was still able to pick up my daily goal, without much trouble. I have a couple of video’s of the action below.
Until tomorrow, Good Trading !
Related posts:
- Bullish Sentiment backs off- Room to Rally
- Market Sentiment
- Market Sentiment as a Trading Indicator
- Market Sentiment Numbers Helped Take the Market Down
- Bullish Reaction Move Expected to Show Up Soon
Tags: bullish numbers, Fear and Greed, Major Turning Point, Rising Wedge
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