How are you feeling? Survey of investor sentiment in equities markets

Sentiment remains overall rather positive on the equities markets, which tends to be somewhat negative from a contrarian point of view. Here's a look at a number of sentiment measurements to see what story they can tell. These will include VIX of course, and CPCE, ISE and COT data. First, at left is the gauge from SentimenTrader, which isn't wildly optimistic but certainly isn't in the pessimistic category. So we might think it's a mildly bearish indicator. Interesting that it's "flipped" in the sense that the long-term gauge is more optimistic than the short-term. For quite a while it was the reverse. I cannot help but think that the widespread prediction we'll see the right shoulder of a bullish inverse "head and shoulders" pattern has people generally looking forward to a dip, that can be bought with anticipation of higher rally levels. Only caution there is, sometimes when everyone's expecting a pattern, it doesn't materialize and something else takes its place. Sure, it can happen, but I don't think we should count on it just because everyone's looking forward to it.

The VIX of course, people are beginning to notice the negative divergence meaning that the VIX has remained relatively higher as equities rose this week. That third touch on my trendline (first chart below) was really a deep dive, but it bounced rapidly and almost looks working on a small reverse head and shoulders pattern of its own! VIX had really pulled away from its short-term moving averages, which was enough to cause a snap-back by itself, but my trendline work suggests that VIX should continue higher; and the chart indicators also spiked up notably. I added after that a ratio chart of VIX to VXV, to see any signals based on comparing short-term to longer-term sentiment. Not sure what to say about that one right now. Well, let's try a bit - at the end of 2008 the ratio chart was "lower" than the VIX, and the descent this year has been shallower in the ratio chart than in the VIX (including a higher low where VIX made a lower low). Would it be fair to say that the ratio chart was giving clues about when the market was heading higher, when it was relatively lower? And now might be saying the market's heading lower, when it's relatively higher?

Next down is CPCE and it looks to me like a coiling, wedging pattern as it's been declining with lower lows and lower highs. It's at the end of moving into higher highs, it almost did that this week. My sense is that if and when CPCE starts making higher highs, that could go along with a market descent, and the game might return to selling CPCE lows rather than buying CPCE highs.

Next is the ISE data from the ISEE charts and data website. The All-Equities ended about 150 today. Their graph as shown on that image contains data through yesterday, and you can tinker with the inputs for it at their website. I set it to a longer time frame, back to January, to get a better look at how relatively high it is. Looks to me remarkably like the inverse of the CPCE chart for the same time frame.

Last below are COT (Commitments of Traders) charts from cotpricecharts.com at COT (Commitments of Traders). The ES commercial traders are actually slightly net long, which is interesting in and of itself, but they are definitely short in SPX, Nasdaq 100, Dow Jones Industrial Average (and even gold - I couldn't resist!). I know that the COTS Timer blogspot is working with an interesting trading system based on COT data, but I don't always quite understand their system or know if it's producing results better than can be had with other systems ... still, worth a cross-reference if you are interested in sentiment data. (I just don't want my reference to them to be taken as an endorsement - I just think it's interesting, that's all.) Mainly I can say that my late mentor considered the ES relative positions the more important, and that one shows they turned long as of Tuesday 6/2, but with an even smaller commitment than what they had previously - take a good look at that ES COT chart and you'll see what I mean.