Bullishness Fades but Odds Favor a Bounce
By John Del Vecchio and Brad Lamensdorf
A little dip in the markets recently has led to a marked decline in the level of Investors
Intelligence advisors’ bullishness. Bulls have dropped to 53.9% down from 56.3% the
prior week. This marks the fifth week below 60% where sentiment was pinned for most
of the fall and early winter.
Importantly, the shift in the bullish sentiment has moved toward “correction” mode as
opposed to outright bearishness.
While the level of bullishness has subsided, it’s still too high. Our own indicators
suggest that we are moving toward an outright sell signal on the market, but we are not
Based on current readings, we expect a bounce.
Even though the level of bulls has moved off its extreme readings, it’s still too high. That
said the odds favor a short-term market move higher. Below is the short-term composite
also courtesy of Inventors Intelligence that measures dozens of technical indicators.
This composite indicator has fallen sharply in the past 10 days. Pressed nearly to the
floor, the market is due for a bounce based on this extreme move recently.
However, now is not the time to get complacent. The level of bulls will have to move
significantly lower and they will have to crawl over to the bear camp before a meaningful
bottom can be put in. Before then, there is likely to be aggressive selling and an
extreme oversold condition in the market. Then a favorable risk / reward scenario is
likely to present itself.
Active Alts uses dozens of indicators to monitor extremes and pounce on opportunities
with tremendous risk / reward ratios in the market. Book a call with Brad to learn how
these indicators can help you navigate the markets in 2021 and beyond.
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