In addition to price action, volume, and the occasional indicator, I also constantly analyze the psychology of the market in my blog. All of those factors help to keep me either on the right side of the tape, or side-stepping when the picture is nebulous. As I have been discussing for a while now, the market reached its “acceptance” phase late last month, where it became a bit too obvious that we were in a bull run. However, there is a crucial distinction between acceptance of a rally and euphoria associated with a major market top. Accordingly, I believe we are still in an overarching bull run, but are currently working through a corrective phase. The evidence below, via @AllStarCharts, seems to support this idea. Thus, I generally favor cash over aggressively shorting here, since the bull can resume at any time. I am more interested in catching that move. Some short trades here and there are fine, but swing traders should be ready to pounce when the time is right.
_______________________________
The latest sentiment polls are out and the Bull/Bear ratio dropped again,
From Dr. Ed Yadrini:
“The change in sentiment has been even more noticeable in the Bull Bear Ratio reported by the American Association of Individual Investors. It plunged to 0.68 during the week of April 11, down from a recent high of 2.86 during the week of January 11. You know what that means: Sentiment is bearish, which is bullish for stocks.”
Source:
Stock Market Sentiment (Dr. Ed’s Blog)
