Investors Gloomy

If  it felt like investors were gloomy yesterday, it was because they were. Rydex traders greatly increased their short positions yesterday. They are now positioned about as negatively as they were last Summer. Sentimentrader.com put out a study yesterday, using the COT report, showing that small speculators have their lowest long position in the indices ever. Add to that days upon days of put buying and a very bleak picture  of investor sentiment emerges. The good news is that it cannot get much worse.

It looks like we will get a large gap up at the opening as Europe is doing well for a second day in a row. While I did not see yesterday's fade coming I do not expect a repeat performance today. That does not mean the bears will not  try at some point. The reason I expect today's gap to hold  is that market participants are already positioned so negatively that its hard to see where the selling comes from. We could see more liquidations but that is a catalyst that is difficult to predict.

3 comments:

pics pics said...

Tsachy, the cboe put/call ratio actually went down significantly yesterday, and the vix was somewhat down too. All this when the market did not rally.
Doesn't that bother you ?

Tsachy Mishal said...

It was still a very high level of put/buying for what was a flattish day. The put/call readings were off the charts late last week so comparatively it might not have looked as bad. But a reading over 1.00 on the CBOE is high.

Tsachy Mishal said...

Also the VIX is quite high.