Sep 21, 2011

Market Sentiment Review

In this weekly sentiment review indicators show more bullish signals as markets tend to rebound from August lows. Investors are still cautious measured by investors fear gauge (VIX), although the indicator stalled showing reversal signs.

Number of companies above 50 MA started to rise with markets rebounding but its move coincides strictly with S&P500 index move. Current  reading of 35% of the companies out of the S&P still indicates oversold signals, leaving markets place to recover. Levels between 10% and 35% signal oversold markets since those levels are -1 to -2 standard deviations from mean level of 59% for the period one year back.

Put/call ratio is falling from its extreme levels in mid August signalling fading bear mood. If compared to previous year correction started April 2010 the indicator's peak is higher in current, which means that current market is heavy oversold. In April 2010 put/call ratio started falling but market trend reversed after the ratio crossed its mean (0.92). Still we are far away from that level, however direction is downward, sign for upcoming reversal.

% of S&P 500 stocks above 50-day MA, Put/Call ratio, VIX

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