The red numbers are the extreme daily readings of 2CS for short to intermediate term SPX moves.
During 2007 there was marked bullish sentiment divergence from January to October. A bearish outcome was confirmed by the extreme bearish sentiment at the summer low (198) which was the most bearish market opinion since 2002. After the rally to October still showed declining bullish opinion compared to January 2007, the bear decline continued.
Rally tops after the October high could only generate bearish readings of 112, 124 and 125 followed by increasingly bearish readings on successive new lows in SPX. Technically the May 2008 rally top was a good place to short on moving averages and retracement percentages. But the 2CS reading of 72 at the May SPX top, far more bullish than any prior rally top after October, suggested that the next new low might be the last.
True to that promise, the SPX low in mid August 2008 sported a 2CS of 161, showing bullish sentiment divergence. So far neither the action in SPX nor in 2CS has been very bullish, and that in turn suggests another revisit toward the lows for a re-test of bearish strength.
Recent Comments