Sentiment Suggests a Pullback

On Friday’s Kudlow & Company, I mentioned that we are overbought, and we should be expecting a  pullback over the next week or two. I said I expect it to be mild, and buyable.

On that same subject, JDC points us to Carl Swenlin’s chart, which suggests sentiment is way too Bullish:

click for larger chart

Chart Courtesy of Decision Point


One of the fascinating things about the market is how so many different approaches an be used to reach the same conclusion. You can use a variety of different methodologies to determine am overbought conditions:

• The last few days of the advance has been on decreasing volume;
• on a time based system (See Raymond James’ Jeff Saut for his day count);
• Dick Arms uses the the Trin (or Arms) Index;
• Charles Nenner of Cycle Forecaster (and one of my partners) uses cycles;
• Kevin Lane of Technimentals suggests internal conditions have decayed predicting a short term pullback;
• and the aforementioned Sentiment factor.

All 6 of these methods suggest upcoming softness.

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