As illustrated by the following 2 graphics, US equity investors have gone from greed to fear in exactly one month despite a relatively small movement in the market (3% in the S&P 500):
While the recent price action -- flattening moving averages and a spike in volatility -- is consistent with a topping process, the sharp decline in investor sentiment during a relatively market movement is not.
I see two primary scenarios:
- A decline to near the rising 200-day SMA (in red), which should bring sentiment to extreme bearish levels and lead to a juicy long setup for nimble traders.
- A rise to new highs over the coming weeks, which will suck in a large contingent of newly minted bulls just in time for a large summer market correction. Whatever happens, i’m fairly certain we are at an important crossroads for the US equity market as March non-farm payrolls are set to be released and Q1 earnings reporting season is about to begin.
Via Energy and Gold.com