Top Advisors Corner

Mark Young: Wall Street Sentiment - A Looming Turn?

Mark Young

Mark Young


Some of you may be familiar with the Wall St. Sentiment Survey that we conduct and provide to StockCharts. We've been running this survey for over 20 years now and have come to notice certain patterns that may not be obvious to the casual observer. One such pattern is the one we have this week; the dead-even split. We have found that when our surveyees are split evenly, it presages a short-term reversal. So, given the current down trend, we would expect a decline into a low of some sort this week and a reversal. 


Do we think that the market will be out of the woods? The short answer is: no. Technically, we're looking at a lot of damage. The ITBM has been negative for some time now and just crossed the zero line a few days ago. That's often a harbinger of more weakness.

This weakness is also confirmed by the Cumulative Advance/Decline volume which was particularly weak on Friday. Also, the weekly chart shows a declining 10-week EMA and a solid Sell from the MACD. 

Seasonally, too, we are in a time period that is generally not so good for stocks. Lows are often made in October and according to Stock Traders Almanac, Septembers is typically down, on average. So, the big picture isn't looking so good for stocks. Short-term, however, it's a different story.

On Friday, the usually-right OEX options traders were buying calls aggressively. Also, our proprietary Options Oscillator (which looks at opening long options transactions to measure excessive shifts in options buyers' sentiment) is flashing a solid Buy.

Between the options sentiment and the message board sentiment that we monitor, we expect a bounce shortly. In the context of the intermediate-term technicals, it may be wise for risk averse traders to use the strength to raise a little cash.

Have a prosperous week!

Mark Steward Young
Wall St. Sentiment
http://www.wallstreetsentiment.com/trial.htm