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Some Investor Sentiment Gauges Reach Panic Levels
By, Simon Maierhofer
Tuesday January 19, 2016
How often can the S&P 500 follow the same script? What script? Drop into the 1,800s and rally. Investor sentiment is bearish enough to spark yet another rally, but will the fourth rendition of the same script bear (pun intended) a surprise?

For the fourth time since October 2014, the S&P 500 is testing the mid-1,800s.

That’s right about where investors threw in the towel before, and with regret watched the S&P move higher.

Will it be the same this time around?

The chart below plots the S&P 500 against the CBOE Equity put/call ratio, the percentage of bullish advisors and newsletter-writing colleagues polled by Investors Intelligence (II), and the percentage of bullish retail investors (polled by the American Association for Individual Investors – AAII).

As a composite, those three groups are about as bearish as they were near prior S&P lows. In fact, the CBOE Equity put/call ratio soared to a multi-year high on Friday, and the percentage of bullish investors is at a 10-year low.

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Sentiment suggests that stocks are ripe for a rally, but this would be the fourth time the S&P is following the same script (bounce in the 1,800s). Is it time for a curveball?

The January 19 Profit Radar Report warned that a break below support at 1,870 would result in a quick drop to 1,820 and provided a long-term perspective on the S&P 500 (has a major market top been struck or not?) along with a short-term forecast.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

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