The Week Ahead: Three Sentiment Indicators Investors Should Follow |
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February 21, 2016 |
February 2016 Bond Updates
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The market continued sharply higher to start off the holiday shortened week and for three consecutive days the gains were impressive. This was enough to get the market's and investor's attention. There were signs early Thursday that the rally was stalling which was supported by the weak technical nature of crude oil.
This was a good example of why it is important to look at more than the price action before taking action. April crude oil had rallied over 17% between the prior week's low and Wednesday's close but as I noted in Thursday's Viper ETF Report " the OBV is still weak . Therefore I would not chase the long side at current levels as a pullback is likely going into next week."
The United States Oil Fund (USO) opened 2.8% higher Thursday before reversing to close on the lows. The SPDR Oil & Gas Exploration ETF (XOP) gapped below the previous four days lows on Friday and trapped the late buyers on the long side. Despite the short term weakness there are signs that crude oil and the energy stocks are bottoming.
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The stock market rally was what I was looking for in last week's "Is There Blood In The Streets Yet?". The negative sentiment and multiple oversold readings from a number of market measures needed a burst of upside momentum to reverse the market's downtrend. The strong price gains along with strong market internals was enough to do it.
In today's article I would like to discuss three sentiment indicators that investors and traders should follow. All are available online but it is important to remember that market sentiment must be combined with technical analysis in order to identify important turning points.
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View more at: http://www.forbes.com/sites/tomaspray/2016/02/20/the-week-ahead-three-sentiment-indicators-investors-should-follow/
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