In the past few weeks, while I have been friendlier toward the market, I have also noted that I thought folks were not nearly as bearish as everyone seemed to think they were. It has been my contention that a bit more bullishness had crept in.
As stocks rise, folks naturally become more bullish, but it also takes some news to help that along and many seem to think the fact that some tech stocks had less-worse-than expected earnings -- or at least better reactions to those earnings -- and the Fed wasn't so hawkish has also turned the tide somewhat.
I am a bit surprised that the put/call ratio for Wednesday was quite high, at 1.05, but I am going to go ahead and rationalize an indicator, something I hate to do, but I'm going to do anyway. I think it is because most post Federal Open Market Committee meetings this year have seen the market give it back. And if there is one thing we know about markets, it's that patterns repeat over and over again until everyone sees them. And then the market changes the pattern. So maybe everyone has learned that "day after" pattern.
However, away from that, let's talk about the Investors Intelligence bulls, which are now at 39%. That is the highest reading since early April. The bears are at 33.3%, which is the lowest since then, as well. The last time this survey had more bulls than bears was three months ago, in late April. I take this as confirmation that my view that folks have gotten more bullish is correct.
And this was before the FOMC meeting, so if we don't collapse in the next few days, the bulls could be well into the 40s by next week.
If the bears scoot under 30% next week it would be the first time since they went over 30% in March. That would be a change in sentiment.
Then there is the Overbought/Oversold Oscillator, which will be overbought Friday. Remember, it is not meant for an exact day, although I love it when it works out that way, but we should know that we're heading into a short-term overbought reading. Notice that in the last 12 months, each time this indicator has stretched up over 700 it has been overbought and we have seen a pullback.
Let me note that the Volatility Index did not make a lower-low (than a few days ago) on Wednesday. It may still do so (it would be helpful, if it did) but the Daily Sentiment Index (DSI) for the Volatility Index is now at 22.
Should the market rally more and the VIX fall some more the DSI is likely to get to the area that says expect more volatility, not less in August.