NAZ 100, NASDAQ And Sentiment

From yesterday:

"Wicked on the shorts who refused to cover those TWO closes back above the SPX 893 neckline, and who refused to cover The Channel breakout that occurred just after the open. UGH."

The short squeeze continued yesterday and took both the NASDAQ and the NAZ 100 above their June 11 highs, and to new 9-month highs. Sentiment-wise, there certainly was plenty of fodder for that kind of wicked squeeze. You will recall that, the day before the June 11 top, we looked at:

"Results of the Wall Street Sentiment Survey, June 8, 2009:

Bulls: 11%
Bears: 78%

The survey chart, posted at Traders-talk.com (thank you) shows that Bearish Sentiment has not been this extreme since early 2003, coming out of the 2000-2002 Bear Market.

June 10, 2009 5:41 AM"

Back on June 10, I also mentioned that the gentleman who posted those survey results observed that selloffs from that kind of sentiment extreme usually do occur, but then a rally ensues. That made a lot of sense. We certainly were overbought and due for a selloff at the June 11 high, but it was very unlikely that the "probervial everyone" had called the top for the year, and even more unlikely that we were going to crash directly off those numbers.

Additionally, participants in the American Association of Individual Investors immediately turned bearish, and have remained bearish, coming off the June 11 top:

AAII members are:

(as of 6/10/2009)
Bullish: 39.25%
Neutral: 21.50%
Bearish: 39.25%

as of 6/17/2009)
Bullish: 33.33%
Neutral: 20.24%
Bearish: 46.43%

(as of 6/24/2009)
Bullish: 28.00%
Neutral: 23.20%
Bearish: 48.80%

(as of 7/1/2009)
Bullish: 37.84%
Neutral: 17.57%
Bearish: 44.59%

(as of 7/8/2009)
Bullish: 27.91%
Neutral: 17.44%
Bearish: 54.65% (TWICE as many Bears at the July 8 low)

(as of 7/15/2009)
   Bullish: 28.68%
   Neutral: 24.26%
   Bearish: 47.06%

Sentiment can be difficult to read, and the intrepretation usually is quite subjective. Bears tend to say, "Everyone is too bullish." Bulls tend to say, "Everyone is too bearish." Have you ever heard anyone say, "I am extremely bearish, and I think that everyone else is extremely bearish, too?!" LOL.

I view sentiment as something "playing in the background," as I have with these numbers since the June 11 high. Obviously, there were plenty of Bears to fuel this short-squeezing rally off the July 8 low, right at the 4½ month Bullish Inverse H&S neckline support, basis the SPX (per our discussion earlier this week), while "everyone" (including Melf) got caught looking at the much-ballyhooed short-term H&S Top! I threw in my SDS position at the SPX 893 neckline, which was fine, but I didn't get long. I wanted a pullback from the low 900's to that neckline, but I never got it.

The upside move this week is a great example of Ms. Market confounding everyone, and rallying with as few people aboard as possible. Sigh...

Hey, no one said that this was easy! LOL.


Basis the Ichimoku Kinko Hyo chart ("At A Glance...The Table Of Balance"), in a bull trend the Kumo (Cloud), represented by the vertical green lines, "should" act as support on a selloff. The recent lows, at Blue #4, found support right at the bottom of the Kumo (Cloud).