A Change in Sentiment to Kick Off 2025
Nothing major, but it's worth noting that it's harder to find a Bull these days and fear has crept into the market.
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The Market
I have to begin today by announcing that we have seen a change in sentiment. Nothing major but definitely worth noting.
The AAII Daytraders, err, bulls, are down to 35.4%, which is the lowest since April (32%). I grant you these folks jump around like day traders, but this is a step in the right direction. And the Investors Intelligence Bulls have dropped to 54%, down from 61% a month ago. 54% is not exactly bearish, but it’s a good step.
Then there are the NAAIM folks who have pulled in their exposure by a decent amount too. A month ago they were knocking on the door of 100 (over 100 means on margin), and now they are down to 64, closing in on where they were in both August and April.
Long-time readers know I am not a fan of Fear and Greed but it is knocking on the door of Extreme Fear.
The options ratios continue to show very little fear though. However the CBOE’s put/call ratio was 1.05 today (sometimes they change this when things settle later this evening), which if it sticks would be the first reading over 1.0 since just prior to the election.
ISEE’s equity call/put ratio was still high at 1.98 but this is the first reading under 2.0 since Thanksgiving.
The VIX is not jumpy but the DSI for it is 50. When it spiked to 28 in mid-December, no one was looking for more volatility. Now that’s all I hear (anecdotal I know). In mid-December the DSI for the VIX was 47. So here, too, something has shifted.
While nothing is at an extreme, I believe the last few days have finally seen some of that bullishness getting wrung out. And that ought to lead to a decent trading opportunity sometime later this month.
New Ideas
I am going to revisit XLE because it’s as if everyone discovered oil today. I’m not sure they love it but they are certainly chattering about it. It is into the resistance area now and the DSI is 81. I’d love to see a shakeout in the next week or so.
We had some good success with American Superconductor AMSC last fall when it emerged from that base. It has come down quite a bit and has stabilized for the last few weeks. It probably has more work to do but at least it is getting interesting again. Put it on your watch list.
Today’s Indicator
The 5-day moving average of the ISE Equity call/put ratio is at an extreme but notice it has also turned down (typical of a high in the market). I’d like to see this come down a lot over the next week.
Q&A/Reader’s Feedback
The question is if TLT is buyable yet. I always prefer when an instrument like this falls out of the pattern and there is panic. Right now it is just trying to hold. I suspect in the month of January I am going to like TLT as a buy. I think this 86-87 area is the right zone and maybe I am trying to be too cute by half waiting for it to be ‘just so’.
I find it hard to take a strong stance on NVIDIA NVDA right now because the stock looks so sideways to me. I am more inclined to think it makes a try for 150 before it makes a try for 130 though. If market sentiment was bearish I would be bullish on NVDA.
I was asked to update my view on GLD and it hasn’t changed much in two weeks. I see the range and when it is at the low end I would play for a move to the top end and vice versa. What would change that view is either a breakout in either direction or a major sentiment shift.
