From the desk of Willie Delwiche.
Key Takeaway: Bulls continue to retreat while bears remain relatively unchanged. The current imbalance in sentiment speaks to cooling optimism and an increasing degree of caution. In recent weeks bears have been on the rise, but so far that has been a short term event. It does not mean that all has been repaired from a sentiment perspective. On the contrary, risks remain elevated. If history is any lesson, the fear and pessimism associated with a complete unwind in optimism will not materialize without instigation from downside volatility. It’s often falling prices that lead the way and fan the flames.
Sentiment Report Chart of the Week: Lack of volatility keeps investors calm
Volatility has picked up over the last few weeks, but it is not leading to much in terms of increased fear and pessimism on the part of investors. Why? Because even with the latest uptick, the number of 1% moves this year is not only well-shy of what was seen last year, but has actually slipped away from the trend of the past two decades. It may take more volatility to bring out fear and concern that last more than just a session or two. Whether or not that is forthcoming remains to be seen.
