From the desk of Willie Delwiche.
Key Takeaway: Volatility is on the rise and the bulls are in retreat. The recent downside pressure on risk assets has driven investors to take caution. Yet, pessimism remains subdued as volatility was unable to stoke real fear. Now that the market is beginning to rebound, the bullish case needs to prove it deserves the benefit of the doubt. Price needs to justify the risk appetite that still lingers and participation needs to expand. On the flip side, another spike in volatility could woo the bears out of their seats and onto the dance floor. The market finds itself at a critical juncture heading toward year end. The action that unfolds in the coming weeks could well shape investors' approach to risk in 2022.
Sentiment Report Chart of the Week: Despite Some Caution, Investors Still Love Risk![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/12/willie12082021.png)
Most of our sentiment indicators show more caution on the part of investors. When looking at Semiconductors, which are making new highs on an absolute and relative basis, the appetite for risk looks undiminished. It’s hard to make the case that investors are running scared when risk-on behavior is still widespread. While a complete wash-out in optimism makes for a cleaner market bottom, you need bulls and an appetite for risk to have a bull market.