From the desk of Willie Delwiche.
Key Takeaway: Sentiment remains neutral as bulls are on the rebound. Both II and AAII bulls ticked higher last week, and the 5-day put/call ratio dropped to levels indicating complacency. We may have seen the reset in optimism that was needed despite a lack of pessimism suggesting a complete unwind. With neither widespread fear nor clear evidence of sustained breadth improvement, the US is in limbo, challenging previous highs yet not confirming a breaking higher. Our suspicion is that a bout of disappointing news or earnings reports could quickly see nervousness and fear return. That could lead investors to search for better opportunities where sentiment has shifted from optimism to pessimism and breadth is clearly improving (EM, anyone?).
Sentiment Report Chart of the Week: Throwing In the Towel On EM![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/10/willie102021.png)
The latest BofA Fund Manager Survey shows that the widespread optimism on Emerging Markets that was present at the start of the year has turned to pessimism. Investors are currently underweight EM and looking to get increasingly so. While China dominates the EM indexes and headlines, breadth there is improving and price has started to stabilize. What the crowd is throwing out, we might want to think about picking up.