Friday, July 27, 2007

Sentiment




Today's CBOE's put/call ratio indicated a low of 1.18, and a high of 1.33. Yesterday, the total CBOE put/call ratio of all stocks and indices was 1.53. These are extremely high readings.

I also saw a tout for Lawrence McMillan (option guru) as he cited an unusual occurrence, where the market had two days of 90% down stocks in the past week. There have been only 3 other 90% down days in the past 11 years apparently. In addition, there has been recent record high short interest data coming from some of the exchanges, and Bubblevision's "Breaking News" coverage of the DJIA down 100 points or more is drawing lots of attention and is always cause for people to do harmful things to their portfolios. In fact, the VIX is also Exhibit A for high fear levels and modest panic.
The key is to maintain your discipline, focus on the process, and stay committed to doing those smart things that got you to this point in the first place. We will assess the situation again this weekend and on Monday morning, with the plan to search for signs of full panic & retreat, while seeking an intraday reversal on heavy volume and a upside surge. The market will probably then have to digest the initial thrust higher, perhaps with a re-test to the lows over the resulting few days, and then a sustained push higher would be imminent. Let's watch and wait! Good luck.

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