Earnings Beats Shifting Market Sentiment

#earnings #market #sentiment


“AAII Sentiment Survey: A big rebound in optimism this week, but Bullish sentiment is still below its historical average for the 5th week running”— Paul Ebeling

This indicator has been at the low end of its range during Summer months, supporting more “fear” than “greed” among participants, despite the market’s overall strength along YTD highs.  This means any market pullbacks will be short in both time and depth.

Futures bid much higher this morning as traders react positively to earnings results kicking off during this Options Expiration Week. 

Sentiment and Breadth Readings:

The VIX readings below 20 favor a “risk on/bullish” approach to markets.  Volatility jumps back over 20-mark as another round of selling takes Indices and Sectors back below their 50-Day MAs.

The Put/Call ratio has treated the 0.80 level as its new “neutral” zone for over a year, rarely probing 1.0, so still favoring strong underlying strength in the market.  A jump over 1.0 has signaled a “buy the dip” opportunity for a year and half now. Drops below 0.80 have hinted at an overheated market.

The NYSE McClellan Oscillator measures the spread between the 19 and 39-Day MAs of Advancing Vs Declining stocks. Sitting back around “neutral/slight bearish” territory for equities.

Bottom line

Early October seasonally: Strength in Energy/Crude/Natural Gas and rising Bond Yields have been pressuring equities the last few weeks.  Most traders have exercised patience and raised cash for opportunities to come, especially with Earnings Season heating up this week among Financials/Banks.

Intermarket Analysis:

Transports (IYT) pulling back after challenging its multi-week resistance… solid reversal yesterday that could lead to a new leg up.

The 10-Year Yield ($TNX) broke out from its Aug-Sept Ascending Triangle pattern in late Sept, stalled out at 1.6% for now.

The US Dollar ($USD) continues to grind higher in context of weekly uptrend off Sept low, pushing to fresh monthly highs.

Crude ($WTIC) continues to climb the right side of the chart, pushing to fresh multi-year highs over $80/barrel. 

Gold ($GOLD) after stabilizing price action to start October, the group captures bids to break above resistance along the 50-day moving average.

Have a prosperous day, Keep the Faith!