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If you're rushing to buy the dip, it's probably smart to be patient. Don't let the gurus convince you the backdrop is "safe", suggesting that stocks climbing the wall of worry or bouncing from 'historic' panic (see below). The sentiment backdrop, if its really necessary to define it (it's not), is more consistent with them rolling down the hill of comfort. That might sound innoxious, but it's absolutely not! The process of rolling down the hill is significantly less predictable. At times, it generates rallies, while others painful consolidations, declines, or crashes. The wild card is the economy.
The economy, as defined by the Economic Activity Composite, is hanging on by its fingernails to a recovery the majority believes will return us back to normal. Normal has left the building, and it's not coming back. The US stock market is stretched to limits not seen since 1899, 1929, 1936, 1987, and 1998. The Fed's magic QE to infinity touch won't reverse the inevitable descent into monetary hell.
Many signs of historic panic? This type of sales pitch ensure a lot of interaction, but frankly, like a lot of analysis on SM, it lacks depth. The lack of depth is misleading.
One of *many* signs of a historic Panic yesterday:— Macro Charts (@MacroCharts) September 21, 2021
SPY Put Volume spiked to the 9th highest of all time.
Prior spikes marked capitulation selling – Stocks bottomed within 0-3 days with only one exception (Feb 2020).
Is this time different – Or is the bad news mostly priced in? pic.twitter.com/omUda50jL7
The CBOT put volume analysis appear convincing. It shows a spike in volume that certainly looks extreme. Examining put and call activity together confirms a short-term spike (CBOT Put Call Ratio Since 2020). The short-term spike exceeded 1, and climbed above the upper Bollinger Band.
CBOT Put Call Ratio Since 2020
Expanding the time series beyond 2020, however, makes the conclusions far less definitive. CBOT Put/Call readings above 1 far less 'extreme' when viewed in the light of 2020, 2019, 2015, 2008, 2007, and many other readings.
CBOT Put Call Ratio Since 1990
Market-driven money flow, trend, and intermarket analysis is provided by an Access Key.