| |
Sentiment Shift May Loom
By Brady Willett
On January 9 the Investor Intelligence's bull/bear ratio hit a
high not seen since early 1999. Considering that the ratio hit lows not seen since late 1998 following September 11, and these lows preceded a powerful stock market rally, this news seems to suggest that a
near-term 'peak' is in.
Invertor Intelligence Sentiment Index (PDF File) ChartCraft.com
Furthermore, the VIX is suggesting that investors are becoming increasingly complacent. When combined, these two reports suggest that it is primarily bulls are
becoming complacent. And right before earnings warnings begin to heat up – who would have thunk it?
Historical VIX 2002 VIX
These statistics may be important - not because they are gospel when it comes to predicting stock prices, but because both the major
U.S. averages are a stones throw away from key psychological marks (Dow 10,000 – Nasdaq 2,000). With this in mind, it would not take a great wave of selling for these thresholds to be broken, and for bulls to
be taken back. This reinforces the notion that the bull/bear ratio could soon drop, and the VIX will soon spike higher.
Yes, these are speculations. However, since investors have taken it
upon themselves to buy stocks solely based on the words 'bottom', and 'recovery', these readings may be telling us something that hard economic data does not: investors have become increasingly
complacently, and bullish -- and this usually spells trouble for stocks.
Brady Willett
BWillett@fallstreet.com
www.wallstreetwishlist.com
January 14, 2002
| |
Printer Friendly Version
Email this Article