Bears outnumber the bulls on Wall Street for the first time since October 2002, according to the latest Investors Intelligence Survey. And investor pessimism has reached it’s lowest levels since 1998.
With sentiment this bad should start trading as if the bottom is in?
Jeff deGraaf ISI Group Chief Technical Analyst joins the panel for this conversation. Following is a synopsis of his main points.
Chart: Put/Call Ratio
Analysis: The Put/Call ratio spiked to a level not seen in years, says deGraaf. That suggests a lot of the bad news could be in the market and that stocks could go higher over the next 20-40 days.
Chart: NYSE vs. Advance/decline Ratio
Analysis: Advancers outnumbered decliners by an order of magnitude that they have not done in sell-offs prior, explains deGraaf. This trend implies that trading immediately after the Fed’s money injection wasn’t just short covering. It was also new money going to work.
What’s the trade?
I expect financials will run, says deGraaf. And materials names could also go higher.