Sentiment has turned finally turned negative enough for a decent bottom to develop. The put-call ratios and sentiment surveys all indicate that the market is due for an intermediate term bounce.
First, the Rydex bull-bear asset ratio as calculated by sentimentrader.com indicate that traders are almost as pessimistic as during the 2003 bottom.
Second, the sentiment surveys show that the bulls have pulled in their horns. Total bulls according to the major sentiment surveys totaled 177 at the end of last week, which is also in line with previous market bottoms since 2003.
The put/call ratios have also hit negative extremes. Both the CBOE Equity Put/Call and the ISEE Call/Put ratio have reached extreme levels. Typically, these ratios don’t give signals until they turn but because both have hit extreme readings that might not be necessary for the market to rally.
So from a sentiment perspective, traders and investors are negative enough to form a durable bottom at current levels.
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