Elliott Wave InternationalmyEWISocioniomics.Net
Home > Stocks
Sentiment Measure Shows No Fear of Major U.S. Stock Decline
If investors are climbing a "wall of worry," where's the evidence?
By Bob Stokes
Mon, 13 Aug 2012 18:15:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly Get the RSS feed Add to more social media services
Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent. Privacy

The stock market's recent rally has seemed to ignore Europe's debt crisis and the weak U.S. economy, and in turn commentators have dusted off an old Wall Street phrase: wall of worry.

  • Why Stocks are Climbing the Wall of Worry -- Equities.com, Aug. 10
  • Global stocks have been rallying in recent weeks, climbing a “wall of worry” -- CNBC, Aug. 8
  • We do this thing on Wall Street called climbing the wall of worry. -- ABC News, Aug. 7
  • Stocks scale wall of worry -- Marketwatch, July 19
That's just a small sample of recent "wall of worry" quotes.
 
However, one reliable indicator of trader sentiment tells a different story: that traders have few if any worries about a big market plunge.
 
In fact, the sentiment among traders has been bullish, as noted by the Aug. 10 Financial Forecast Short Term Update [wave labels removed from the chart].
 
 
[The chart below] plots the 5-day closing CBOE Equity put/call ratio, which declined to .60 at yesterday's [Aug. 9] close. That was the lowest close since May 1 (.58)...This measure shows a greatly diminished amount of put volume relative to call volume, indicating that traders feel complacent toward the need to hedge against a major decline in stocks.

 

Trader sentiment is one of the pillars of market analysis and forecasting -- two other such pillars are wave structure and momentum.

All three pillars now send the same market message.
 
The Aug. 10 Short Term Update provides in-depth analysis of the three pillars and tells you why they all agree.
 
The issue walks you through 13 stock market charts. Each chart supports the message of the other and, viewed together, they tell a comprehensive stock market story of the first importance.
 
You'll also find eight other charts that update you on bonds, U.S. dollar, euro, gold and silver.
 
EWI offers a 30-day, no-obligation trial of The Short Term Update.
 
 

Tags: Elliott wave, investor psychology, S&P 500, sentiment
Rating: - based on [32 rating(s)]
Rate this content:
  
 
EWI's Event Calendar
Aug. 15-17       

San Francisco Money Show
Nov. 10-13      

New Orleans Investment Conference


Stay Ahead of the Trend in U.S. Stocks

FFSEWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:
  • Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Theorist -- Bob Prechter's monthly big-picture insights.
Put the Financial Forecast Service on your screen in minutes, risk-free>>

Most ReadHighest Rated
Free Video Course
Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.


The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.