Not Much Has Changed
Aren't I supposed to get MORE respect when prices fall?
On July 1st, I posted a chart that I felt was representative of the sentiment situation at the time - namely, that traders were overly confident in the current environment, which made me want to reduce equity exposure dramatically. Unfortunately, even with the relatively stiff declines we've seen since, not much has changed.
I've reprised the same chart below, updated through yesterday. It is very apparent on the chart the wide discrepancy we're seeing now compared to what we saw during the previous two lows in March and May.
I've felt since January that we would see a wide trading range through much of the year, but I'm becoming less intrigued by that notion now. The main reason is that most of the measures I follow look similar to the ones above - a continued trading range seems to be the prevailing sentiment now, so traders are not becoming more bearish as prices fall. They appear to be quite confident that technical support will hold and we will bounce back up to the top of the range.
I become exceedingly uncomfortable when it appears as though an unusually large number of traders are thinking the same way, so I am becoming more and more uncertain that the May lows will hold. It is strong technical support, and I suppose there is a chance that if so many are thinking the same way it could become a self-fulfilling prophecy, but unless the sentiment picture improves (or price seems to be stabilizing), I for now am holding off on re-adding the equity exposure I took off several weeks ago. As always, just one man's opinion.
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