Wednesday's relatively modest moves by stock proxies and absence of major economic data or policy pronouncements gives us a chance to take a step back and look at some various issues of interest, including the smorgasbord of mindsets about this market.
Sentiment and Speculation
Picking up where we left off Monday , the issue of sentiment remains paramount, and the news Wednesday was not good for those long stocks. Chartcraft.com's Investor Intelligence survey showed bullish sentiment rising to 55.8% vs. 48.3% a week ago. Bearish sentiment fell to 24.4% from 29.2% the prior week. Meanwhile, bullish sentiment among the American Association of Individual Investors' survey of its members fell to 48.6% on May 1 from 63% on April 24. (The next AAII survey is due on Thursday.) Elsewhere, the CBOE Market Volatility Index and its Nasdaq counterpart continue to hover around recent lows. Although the Nasdaq Composite was Wednesday's relatively weakest major average -- falling 1.1% amid disappointment about Cisco's ( CSCO) outlook -- the VXN slid just 0.4% to 32, ending well off its session high of 33.36. On a more positive note -- if sentiment is a contrarian indicator -- the CBOE's put/call ratio has crept up from the low 70s late last week to 0.91 Tuesday and 0.92 Wednesday after trading as high as 1.06 intraday. Similarly, the 1-day Arms Index jumped 75% to 1.31 Wednesday, although it's traded in a wide range between 0.62 and 1.33 in the past week. As discussed here previously, gauging sentiment is tricky because there are so many different ways to measure it. Also, people tend to see what they want to see: i.e. bulls see hordes of naysayers while skeptics decry the wild optimism all around them. Anecdotally, I've gotten a lot of email lately from readers chastising me for not being bearish enough, something I (frankly) never would have imagined just a few short years ago. Also, most of the market watchers/newsletter writer types I follow -- who aren't dogmatic either way -- remain pretty skeptical about the recent rally, even if grudgingly so.