"It's all about investor optimism" since bearish drop averted, right? Here's the hot sentiment proof

Whew! - now that the wolf's bad breadth improved and didn't blow the market's house down into a nasty head and shoulders decline, as everyone could see the rebound from that neckline ... now "it's all about investor optimism." And I can prove it! At right is the sentiment gauge posted this evening at SentimenTrader. I think it's fair to say that shows plenty of short-term optimism! As for the ISEE charts and data, you can see from how the "All Equities" portion looks as of the close today (image below) that those data also show enthusiasm picking up again.

For my readers who are enthusiasts of VIX analysis, you've already seen my VIX charts I posted intraday and after hours, showing how VIX did a serious test of my long-term $24.78 Fibonacci level. So, check out Bill Luby's article, VXX Volume Spiking to New Record as Investors Bet on Increasing Volatility at his VIX and More blogspot, where he shows how VXX volume spiked today (July 15), at over 1 million shares just before 2:00 pm (on the way to breaking this VIX short-term futures ETN's volume record of May 21).* Also take a look at Jason Goepfert's recent charts analysis at the Sentiment's Edge blog (his blog hosted by/related to SentimenTrader). Yesterday he looked at the extra dimension of the premium or discount at which the front-month VIX futures are trading to the cash index, showing how this indicates a "cloudy" future for the equity markets. Also, last week, he posted a chart analysis comparing VIX with the new Credit Suisse "fear index" indicator. The thought is that VIX may be masking underlying sentiment in certain market conditions, as when volatility drops while put prices are rising (as he showed for last week, citing Biggest VIX Drop Hides Options Bets S&P 500 Will Fall, Bloomberg, July 6, 2009). It's very interesting in that the VIX has been dropping while the CSFB Fear Index was at a multi-month high last week. Of course, put prices took a real hit today! But Jason's research posted last week indicates that over a three-month period, equity prices typically suffer after this divergence in the two indicators.

*VIX traders will also want to take a look at Bill Luby's earlier post, Some Thoughts on Current Volatility (7/15/09 at Bill's VIX and More blogspot).

I think it's worth reading what the COTS Timer blogspot is saying too, although I don't think I can really summarize it so you might just check it out - addresses not just equities but natural gas, oil, the banks, even gold. Also, their trading style is quite different from that of many other traders, as their signals often are marked for positions to be open or closed a few weeks after the signal - so you need to be aware of that - but even if you don't follow their actual trading model, the commentaries are good to consider. For that matter, let's take a look at the sentiment poll results at TickerSense (see TickerSense graph and chart image at right of this paragraph). If you don't know this one, be aware that it isn't deemed a contrarian indicator - TickerSense polls analysts they consider reliable and the signal is supposed to be consistent. Meaning for this week, should be interpreted as bearish for the markets - ouch! but, well, the week ain't over yet, is it? Maybe it's even more interesting to check out their accompanying chart - notice how the bulls declining and the bears increasing looks like more of a trend than this chart has depicted for many months prior to November 2008.

And, here's the ISE chart/data as of the close July 15: