Is the Bull Train Full? Nope!
On Friday, the Nasdaq made new all-time highs on strong earnings from megacap tech giants Amazon.com (AMZN), Intel (INTC), Alphabet (GOOGL), and Microsoft (MSFT).
This spike came on the heels of what looked like the beginnings of a downtrend.
On Wednesday, October 25, the SPX index made a lower low and we saw the biggest intraday range since early September.
So let's take a fresh look at our sentiment indicators to see how the crowd is feeling ahead of the weekend.
(click here for a primer on the sentiment indicators below)
1) VIX Spread – Bullish
On Tuesday, October 24, the VIX broke its shocking streak of 25 days in a row with an intraday low under 10, and went over 13 on Wednesday for the first time since September 5.
As of Friday morning, the VIX is hovering around 10.20
This gives us a 3-month spread of about +4.00, which means traders are very bullish.
(click here for a primer on the VIX spread)
2) CNN Fear & Greed Index – Bullish
The Fear & Greed Index is at 70, which marks modest greedness on thepart of investors. It hit multi-year highs at 95 just 3 weeks ago.
3) AAII Sentiment – Neutral
The latest AAII Sentiment Survey shows that 39.6% of individual investors are bullish, up slightly from 37.9% last week.
This is in-line with the long-term average of 38.5%, so it's basically neutral.
4) CBOE Equity Put-Call – Bearish
The CBOE Equity-Put Call ratio was at 0.61 on Thursday, below the 0.655 long-term average as traders aggressively bought call options ahead of a big night of earnings. Those buyers certainly woke up happy on Friday!
The 10-day moving average is 0.664, which is slightly above the long-term average, indicating higher-than-normal demand for put options.
I would call this very slightly bearish.
Conclusion
Out of 4 sentiment indicators, we have:
- 2 bullish (flat from last week)
- 1 neutral (flat)
- 1 bearish (flat)
Overall, sentiment is basically relative to last week.
The mood is still moderately bullish as traders think about what's next.
Just a few weeks ago, traders seemed downright insanely bullish, though they calmed down a bit even as the indices stretched to new highs.
I think we're in a decent spot. The mood is positive, but there's still room for folks to hop on the bull train.
In particular, options traders seem like they have room to get more bullish. Thursday saw heavy demand for call options, particularly in tech names like AMZN and MSFT.
But the CBOE equity put-call indicates that overall, traders have been favoring put options, possibly because they were afraid of another whoosh down from the lower low on October 25.
Now the big question is whether the strength in tech will push the bulls back into bullish insanity.
Earnings season as a whole hasn't been all that great, so investors may allocate more money towards tech because that's where the numbers have been best.
The next big reports to watch are Apple (AAPL) on Thursday, November 2 and Nvidia (NVDA) on November 9.
If they both beat big, maybe the bulls just keep on buying.