loader image

Bearish Sentiment Should Worry Traders, But It’s Not What You Think

by | Sep 13, 2021 | Stocks

There’s a saying out there that “Stocks only go up.” 

Of course, we all know that’s not true. Thousands of stocks go down every day… 

But just look at the S&P 500 over almost any multi-year stretch, and you’ll see what they’re talking about… 

Over the past five years, the S&P 500 is up over 100%. In the past 20 years, it’s up more than 230%. 

Yes, there were some major corrections in those time frames… But overall, stocks keep going up. 

So traders should be worried when the market sentiment cycle turns bearish, though, it isn’t for the reasons you might think… 

Gap and Go — Volatility in the Market Sentiment Cycle

This past week ended with a lot of bearish bets hitting the tape. 

And then over the weekend, market sentiment cycled the other way. 

If you looked at the S&P 500 futures index this weekend, then you saw we gapped up about 10 points on Sunday and continued to rally about 25 points Monday morning. 

That’s a pretty big move and if we want to understand what caused it, we need to ask ourselves a couple of questions. 

First, was there any big news? Not really, so that’s a bust… 

Next, we need to see what happened the week before and where we are in the market sentiment cycle.

There are a few ways to put this puzzle together. 

My routine typically involves browsing through financial Twitter and a few news sites. I’ll also look to see if there’s been an uptick in put buying. 

This means a growing number of traders think that markets could take a turn, which is what happened this past Friday. 

When that sentiment is all over Wall Street, then no news is great news. 

That’s when things can get out of hand for the bears — the markets gap up and just keep on going. 

Check out the video below and let’s talk about how gap and go scenarios happen, and how we can leverage them when they do. 

P.S.  What if there were an “insider” shortcut everyday traders could use to generate more money than most people make in a year…

In just a few weeks?! 

Well, it’s possible by taking advantage of a hidden relationship between stocks very few outsiders even know about. 

It’s a secret shortcut I’ve used over and over again to grow my wealth… 

And for a short amount of time, I’m breaking my code of silence to share how this “insider” shortcut can help everyone else, too. 

Get the Details Here 

WRITTEN BY<br>Lance Ippolito

Lance Ippolito

What to read next

99 Problems and a “Pivot” is One

99 Problems and a “Pivot” is One

A friend of mine sent me this chart about three months ago. I should probably print it and keep it in my wallet next to a photo of my daughter. Given the sheer number of questions I’ve fielded lately, I’ll probably end up showing this chart more than her picture.

read more
Everything Everywhere, Going Down, All At Once

Everything Everywhere, Going Down, All At Once

When our momentum reading went negative last week, I didn’t know that we’d have the second largest bank failure in U.S. history three days later. All I knew was that it went negative… and that we got out of the way.

read more
Trust But Verify…

Trust But Verify…

I want to talk about our version of “Trust but Verify” in the markets. Qualification is the most important part of the investing process. And this F score value strategy looks to be crushing the current market.

read more

Have any questions? Contact Our Customer Service Team