Weekly Sentiment Update: The Bears Are Growling, But No One’s Listening
Permabulls always say everyone's bearish.
And permabears always say everyone's bullish.
But let's look at the actual numbers to see how the crowd actually feels.
Last week, bears started sneaking out of their caves just in time for Spring.
And with the bulls continuing to hold steady in the face of doubt, let's see if anything's changed.
1) VIX Spread – Bullish
The VIX spiked to 15 early Monday, but it's back down under 12.
That has the 3-month VIX spread is at +2.69 which indicates that traders are moderately bullish.
2) CNN Fear & Greed Index – Bearish
The Fear & Greed Index is at 34, up slightly from 30 last week.
F&G operates on a 1-100 scale, and a reading of 34 means traders are bearish.
3) AAII Sentiment – Bearish
The latest AAII Sentiment Survey shows that 30.2% of individual investors are bullish, down from 35.3% last week.
This is well below the long-term average of 38.5%.
4) CBOE Equity Put-Call – Bearish
The CBOE Equity-Put Call ratio was at 0.64 yesterday with a 3-day moving average is 0.67. This is indicates that traders are slightly bearish.
5) ISE Sentiment – Bearish
The ISE Sentiment Index is at 83 (83 calls bought for every 100). The 10 day moving average is just 90. This indicates that demand for put options continues to outstrip that for calls.
However, I am strongly considering dumping ISE Sentiment from this weekly update simply because it's almost always reading bearish no matter what happens in the market.
I may replace it with the CBOE Skew Index, which measures how much traders are paying for protection against tail risk.
Conclusion
Out of 5 sentiment indicators, we have:
1 bullish
4 bearish
0 neutral
This shows even more bearishness than last week.
So while the bears are pushing an age-old theme — everyone's complacent — I'm getting the feeling that traders are waiting for another shoe to drop, even though we've seen improvement in the action below the surface.
Yesterday, the Nasdaq and Russell showed relative strength, and on Tuesday, we saw great upward action in the banks.
So while some of the so-called “Trump Trade” has unwound itself, the bears' growing isn't adding up to much.
But there's an important question to ask here: how can sentiment be bearish if the SPX is 2% from all-time highs?
We've seen this over and over throughout the bull market — markets hovering near record highs, but sentiment reading negative.
My guess is that there's inherent distrust in the market, and traders are eager to turn bearish on even small declines.
And those that are buying often appear to be doing so reluctantly.
It's more of a “I might as well buy” attitude than “I'm buying because we're going straight to SPX 3000.”
And that's a big difference from the last two bull markets.