Stock Market Sentiment Indicates Investors Should Remain Cautious
We use investor sentiment as contrarian indicators about the direction of the stock market. Short-term and long-term indicators this week were giving mixed messages, which tells us to remain cautious. The CNN Fear/Greed short term sentiment Indicator moved from a very greedy 62 at the beginning of May down to 28, which is a positive signal for the stock market short-term.
However, contrast that with the VXX volatility index (see chart). It has yet to show the kind of upward move to suggest a low could even be in sight.
As for the intermediate term, the Investors Intelligence Bulls Bears poll of market newsletter writers moved from 57% bulls to 50%. That’s a positive move from a contrarian point of view. However, bullish sentiment remained at 18%. History has shown us that bearish sentiment needs to climb to 30% or higher before we can call a durable stock market bottom.
Chart provided by https://www.investorsintelligence.com