Last week I pointed out a technical – and bearish – indicator that the number of stocks on the NYSE above their 200-day moving average dropped sharply.
Other indicators based on “sentiment” are bullish. Sentiment is defined by The Free Merriam-Webster dictionary as “an attitude, thought, or judgment prompted by feeling.” Indicators based on sentiment are typically “contrary indicators,” which means “when everyone is bullish; that’s a bearish indicator.”
Along these lines, the Sentiment Survey by The American Association of Individual Investors (AAII) was recently at is lowest reading of the year with 25.6% of responders bullish and 41.4% bearish. Also, there have been reports that the percentage of newsletters writers who are bearish has risen to a 25-year high. These extremes in bearish sentiment suggest that the market is due for some bullish price action.
With all these seeming extremes in both opinion and indicator readings, I’m just sticking to reading my charts. I am buying stock and selling covered calls if the stock is reported to have good fundamentals and appears to be in an up trend. If the stock is called away, I may do it again on the same stock or a different stock. My stop-loss orders will tell me when this game is over.