For the week ending on 5/11/22, Sentiment remained very negative: Bearish remained the top sentiment (49.0%; very high) & bullish became the bottom sentiment (24.3%; low); neutral became the middle sentiment (26.6%; below average). Investor concerns included high inflation; high market volatility (VIX, VXN); supply-chain disruptions; crypto-crash (there is correlation between cryptos and speculative stocks); Russia-Ukraine war (now 11+ weeks). In the Survey week (Thursday-Wednesday), almost everything was down (stocks, bonds, oil, gold) with the exception of dollar. #AAII, #Sentiment, #Markets
https://ybbpersonalfinance.proboards.com/post/626/thread
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Any thoughts on the following?
VIX was down yesterday when S&P 500 was down a decent amount. VIX is having difficulty cracking 35 today.
AAII- S&P 500 has been down about 10% since 4/28 while Bearish sentiment is also down coincidentally about 10% - focusing on the severity of the moves in the same direction rather than the percentage of the move.
CNN fear and greed index is at 6 - the lowest in a year. (CNN is no longer giving me a long term chart of this but I do not remember seeing this low reading in ten years, except for in March 2020).
2-10 yr rates have come down about 20 bps in the past week but not collapsing.
The question I am asking myself is, is the stablecoin fiasco muddling some of the readings and perhaps the contagion is not systemic enough to call a bottom in the stock market?
P.S.: Senate confirmed Powell for the second term.
Thanks.
One debate is whether market is still too high by some valuation measures. With market down a lot already (Nasdaq Comp and R2000 in bear territory and SP500 approaching that) and AAII Sentiment so negative, I am willing to buy something, and certainly not selling out.
High VIX and low SKEW condition is also interesting that happens more near bottom - may be interim if not "the" bottom.
https://stockcharts.com/h-sc/ui?s=$VIX&p=D&b=5&g=0&id=p02688406778
My thinking only defines my actions.
As a counter sentiment, many equity ETFs are still trading at a premium.
But I see certain fears....fear of a recession and fear over the recently removed "Fed PUT"...as the most serious overhangs. The Fed balance sheet rolloff doesn't even start until next month. Ah, but one could argue that the market is forward thinking and that this is possibly baked in now, right?
My thinking: Expect a tough few months for equities, with classic bear market rallies mixed in. As long as Fed backing is temporarily shelved, the market could languish or drop. Fed perception is huge.
We had complacency in the markets for far too long. A little fear keeps us honest, and bubbles need to be popped. I'm a buyer, in increments. I don't think the bottom is close yet.
Makes sense, given some equity ETFs still trading at a premium.