S&P500 Sentiment Analysis

S&P500 Sentiment Analysis
I started out thinking that 2023 would face many headwinds, and it might. But near term, to the contrary, markets are bouncing back again. What does it mean? The chart below of the 13-day CBOE Put/Call ratio has some clues. High or extreme readings in the indicator have been associated with meaningful lows in the market that hold for weeks or months. The most recent reading is in that category. What is also potent is that the PCR has been rising for the entire of 2022, meaning that the market was making lower lows and the PCR higher highs up until now. The most recent decline in Dec 2022 involved a new high in the PCR, not confirmed by a new low in the S&P 500. This bullish divergence can mean that the S&P 500 may be ready to surprise us to the upside first. My minimum expectation so far was 4013, but now I am also considering the outlier of a bigger retracement up to 4320 given the extremely negative sentiment at the moment. 4320 is 61.8% of the entire decline seen last year.

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