I keep reading that sentiment is not low enough to see a bottom here, meaning people are not bearish enough.  There are many ways to determine sentiment but many of the indicators are giving different readings.  The one I talk about all the time is the AAII Investor Sentiment Survey.  Thursday's new reading showed those considered bullish at a 26%, the lowest point on the chart.  Yet the bearish reading was only 36%.  I would like to see that over 40% but the real eye opener is the ratio (bottom blue bar chart).  At .72, it is down to an area where we normally see a bottom.





                                 Chart provided courtesy of www.decisionpoint.com

What concerns me is that we haven't seen that panic selling I keep talking about.  Notice the market action (that is a weekly chart) during the other two instances of ratios down near .70.  Each time saw a deep sell off that turned around quickly.  I call those kangaroo tails.  We haven't seen that yet.

Also concerning are some of the other sentiment surveys.  I won't display the chart here but the Investor's Intelligence Survey has the bullish percentage at 56% and the bears at only 24%.  That is certainly not panic selling mentality.

This is not painting a clear picture for us which doesn't surprise me since we are likely in a consolidation period where we will bounce around for a while with no real direction.  How do play that?  You buy weak, oversold conditions and sell strength and overbought conditions.  If you look at the January seasonality chart at the bottom of the page, one thing that sticks out is the typical strength at the end of the month.  February is not the greatest month historically so perhaps I will ride out this month and lighten up some time next week. 


                              Chart provided courtesy of www.decisionpoint.com

That's all for today.  I'm still watching 1163 and 1180 on the S&P 500.  Going above or below these levels may give us a better idea of future direction.  Currently 50% C, 50% S fund.  Have a great weekend.

                              Chart provided courtesy of www.sentimentrader.com