I’m sure this is going to be a common theme over the weekend in the blogosphere, but I’m going to chime in with my two cent perspective on market sentiment. Despite the market hitting a new bear market low, there doesn’t seem to be any panic. Sure it didn’t feel good watching the market drop like a rock at the open, but it’s ensuing ebb and flow throughout the rest of the day almost felt orchestrated. Not only that, I actually thought for a moment we were going to rally and have everybody head into the weekend with a “feel good” attitude going into next week.
Yes we are oversold and run the risk of a melt up, but nothing in the charts suggest we have to go up. In fact, the charts remain extremely bearish and I expect us to continue moving lower until we get some type of capitulatory trading bottom. I would be very suspicious of any rally, until we get a good wash out of any longs that have held through this drop. There are still many people trying to pick a bottom here that I think are going to get burnt in the downdraft. I even ventured on the long side at one time today, but quickly exited when I realized that it wasn’t a smart trade.
Below are some of the secondary indicators I’m watching to determine trader’s sentiment. Also, only 70% of today’s volume was on the downside, which is not a very high number at all.
Look for a spike above 1.10 for a healthy dose of fear.
Below on -1000 would be a nice reading here.
I’m not going to put a target on this, but any spike over 1000 should be a green flag.