Key Takeaway: The lack of a meaningful rebound in price sustains a subdued atmosphere across the market. Sellers continue to drive prices lower and equity put/call ratios are on the rise. But due to the overwhelming decline in call volume this speaks more to a lack of risk appetite than outright fear. While pessimism is certainly present and has reached levels associated with opportunity, there is still plenty of room for sentiment to unwind. Current conditions carry significant risks with lackluster price action and equity ETFs starting to experience net outflows (three weeks in a row and four of the past five weeks). Simply put: we have not seen significant evidence of capitulation. Just because the recent market environment has been tough doesn’t mean it can’t get worse.
Sentiment Report Chart of the Week: Is “As Bad As It’s Been” Good Enough?
Recent selling pressure has pushed the NASDAQ 100 into negative territory on a year-over-year basis. That has been unfamiliar territory over the past decade. The yearly change in the NDX is lower now than it was near the COVID lows during March 2020 and is comparable to the worst levels seen in 2016 and 2019. With investor attitudes turning sour, the question for market participants is whether “as bad as it’s been” is good enough to spark a rally? Or will investors unaccustomed to losses continue to re-evaluate their equity exposure?
