Weekly equity sentiment poll (3 Oct 16)
The results for the weekly equity sentiment poll are in and there are a couple of interesting trends worth pointing out. As a reminder the weekly equity sentiment poll uses twitter polling and distinguishes between bullish and bearish on equities for fundamental vs technical rationale.
To start with, the above chart shows the trend for each of the 4 options in the poll (bullish or bearish and based on fundamentals vs technicals). Compared to the equity sentiment poll for last week this week saw less bears on both technicals and fundamentals reasoning, with increases seen in bullish on fundamentals and in particular bullish on technicals - bringing that index above the previous peak.
Looking at the overall bulls-bears spread, it improved again this week to just below the previous high (week of 4th September). While it has made a strong overall recovery off survey lows at the market low it's probably not quite at the point where you would start thinking about taking contrarian sell signals from it (unless you think the market is in a downtrend). As I wrote in this week's S&P500 ChartStorm I think the coming week will present an important test for markets.
Below are the 4 supplementary charts showing the bull bear spread specifically for "fundamental analysis" rationale and "technical analysis" reasoning. Also included is the technicals vs fundamentals spread (a gauge of whether technicals or fundamentals are driving the predominant view), and for good measure the number of respondents.
The most notable standout is the steady decline in the fundamentals bulls/bears spread, this reflects both a decline in bulls and increase in bears. It is interesting that this indicator had been declining into the recent selloff. However what's also interesting is the rebound this week - while it's had many "rebounds" it will be informative if this one starts to turn up. If this is representative of the wider sentiment (which I think it is) then the market is setup to be surprised if the fundamentals improve.
Also worth commenting on is the sharp improvement in the technicals bull-bear spread (an 8 week high). A bullish bias on technicals with scope for surprise on fundamentals could drive the market higher.
Bottom line: This week saw a slightly more bullish tone overall, but pessimism remains on fundamentals.