Jeff’s note: Before we get to today’s topic, this is important…
My colleague, Jeff Brown, is hosting a special event on Wednesday, January 26 at 8 p.m. ET, on a topic that is quite popular these days: NFTs.
Frankly, the whole concept of non-fungible tokens is foreign to me. But, Jeff is a super-smart guy, I value his opinion, and he believes this technology has incredible potential.
Jeff has discovered three little-known NFT-related cryptocurrencies he wants to share with readers. Plus, he’s even giving away a new collection of NFTs for free.
You can get the full story from Jeff Brown right here.
Believe It or Not, It’s Almost Time for a Rally
By Jeff Clark, editor, Market Minute
There’s panic in the air, and blood in the streets.
Financial assets are getting crushed…
The S&P 500 is down more than 8% so far in 2022. Treasury bonds are down 3%. Bitcoin has lost 21%. And, Cathie Wood’s ARK Innovation Fund (ARKK) – the most widely touted ETF of the past two years – has given up all of its gains from 2021 and half the gains from 2020…
Folks are bearish.
Last week, the American Association of Individual Investors (AAII) reported that the percentage of survey respondents looking for a rally in stocks over the next six months was just 21%.
Those looking for a decline topped at 46%. That’s the lowest percentage of bulls, and the highest percentage of bears in 18 months.
That means we’re probably not too far away from the start of a rally.
Investor sentiment is a contrary indicator. When everyone else is bullish, it’s usually a good time to be cautious. And, often the best time to put money to work is when everyone else is bearish.
Lots of folks turned super-bearish on Friday.
So bearish, in fact, that the CBOE Put/Call ratio (CPC) spiked to its highest level since the COVID-inspired stock market meltdown in March 2020.
Just take a look at this CPC chart…
The CPC is a short-term contrary indicator. It compares the volume in call options to the volume in put options.
A reading below 0.80 shows extreme bullishness (horizontal red line) – meaning folks are buying a lot more calls than puts. A reading above 1.20 (blue line) shows extreme bearishness as speculators jump over each other to buy puts.
Friday was the first time in almost two years the CPC jumped above 1.20 and is currently sitting at 1.26.
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Nobody was “buying the dip.” Most folks were buying puts and betting on even more downside in the days ahead.
Of course, anything can happen. Maybe those put buyers will be right, and the financial markets will continue to get crushed this week.
But, the stock market typically does not reward the popular trade.
And, with the Volatility Index (VIX) on the verge of generating a broad stock market buy signal, it seems to me the market is near the end of this decline phase.
Traders should be buying into any weakness early this week.
Best regards and good trading,
Jeff Clark
Reader Mailbag
In today’s mailbag, Delta Report member Marjorie thanks Jeff for his insights…
Of all the articles I read, I find Jeff’s insight on market movement has been one of the most “spot on” and reliable for me. Thanks.
– Marjorie S.
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].