The good news is:
- If the market heads lower over the next few days we will get a better oversold reading. One that should lead to a better rally.
- The AAII survey has reached an extreme that typically leads to a rally. The bulls are at a lowly 24% while the bears are at 48%.
- The Investors Intelligence bulls fell to levels that typically lead to rallies although the bears are still way too low at 22.6%.
- We have seen extreme put buying. The CBOE put/call ratio has been over 1.00 for 7 days in a row. The CBOE equity only hit .99 on Wednesday. That level has not been seen in years.
- Hulbert sentiment is extreme and arguing for a rally.
- Rydex traders are positioned in a neutral posture. This is an improvement as they have been excessively bullish all year.
A move lower over the next few days would get the market fully oversold and likely bring out even more bearishness. If that were to occur I would shift my short Put positions into outright longs. If the market continues to chop around it will be a tougher call. Either way, I believe it is late in the game for the bears. I believe there will be a better entry point for the bears and am partial to the long side.