- The American Association of Individual Investors weekly survey showed that less than 30% of those surveyed describe themselves as bullish on the market. This is the first time since November 2009 that the percentage of bulls fell below 30%. The percentage that describe themselves as bearish rose to 43%, also the highest since November 2009.
- The International Securities Exchange's (ISE) customer-only, equity-only 10-day call/put volume ratio has plummeted to its lowest level since December 2009. The current 1.58 reading is on the heels of a very low 1.28 reading on Thursday.
- Investors seeking portfolio protection drove the CBOE Market Volatility Index (26.11) to a high of 29.22 on Friday afternoon. Since early September, this index has peaked in the 30 area. Bulls should take note, however, that the VIX closed the week above its 200-day moving average, which might suggest that we are moving toward a higher period of volatility in the market, which would translate into additional selling.
Many major indexes are trading just above strike prices with major put open interest, as expiration is only two weeks away. For example, there is significant put open interest at the 105 strike on the SPY, which equates to SPX 1,050. Should this level break, delta hedging by those players that sold the puts could create significant selling. But if the indexes hold above these major put strikes in the days ahead, short covering related to the expiring put open interest could drive the market higher in the days ahead.
Our theme remains the same -- hedge your long positions. The current pullback could be a major buying opportunity within the context of the advance since March 2009 and the bigger-picture fears about the economy (which leaves room for positive surprises in the future). But the SPX's failure at the 160-month moving average in January, and the subsequent break below the 80-day moving average, still leaves cause for concern.
On a final note, the below table lists the SPX's return on the first day of the week since September 2009. Consider this some food for thought when planning for Monday morning.
- The previous eight occurrences have been positive.
- The previous 13 of 14 occurrences have been positive.
- In the table below, the last 19 of 22 occurrences have been positive for an average of return of 0.78%.