End of the Month Sentiment for October

10/30/2014 6:00 am EST


Ed Carlson

Author, George Lindsay and the Art of Technical Analysis

Ed Carlson of SeattleTechnicalAdvisors.com discusses this week’s market sentiment in direct relation to last week’s and explains how he is starting to question his forecast for a bullish November.

The American Association of Individual Investors survey (AAII) has a good record in signaling important lows. Despite the previous week's large selloff the survey showed optimism at a six-week high (the survey was completed prior to the Friday rally). That aberration should have been corrected last week. Instead, last week's numbers show optimism surging and pessimism plunging again, implying that the October 15, 2014 low was not an "important" low (the "buy the dips" mentality was stronger than any fear created by the market drop). With optimism already more than one standard deviation above average, I am beginning to question my forecast for a bullish November. Equities may top out sooner than previously expected. It's looking very possible that the next high may see equities drop to new lows.

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By Ed Carlson of SeattleTechnicalAdvisors.com

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