What Was Investor Sentiment Telling Us?

by Greg Rieben January 24, 2022

We've been waiting patiently for that gap down open that continues to make new lows throughout the morning combined with a VIX in the mid-30s and we finally got it. The rubber band finally stretched to the max without breaking.

Here are the low to high moves from Monday's trading: QQQ 6%, IWM 5%, and SPY 5%

But it gets even better in some individual tech names like SHOP 20%, TSLA 9%, NVDA 11%

And how about that volume in QQQ today? It had the largest one-day volume print in more than 10 years. Capitulation? Maybe.

In last night's video to premium members, we looked at what sentiment was telling us to try and get an idea of how close we were getting to a tradable rally.

The Put/call ratio, AAII Investor's Surveyed Sentiment, and the Hulbert Nasdaq Sentiment Index were all at extreme levels but one thing was missing? The VIX.

The Volatility Index or VIX had been very subdued for the type of selling we saw last week. It failed to get above the December highs while stocks continued to slide lower into Friday's close...

In my opinion, we were not going to get a tradable low or a snapback rally until VIX got back to the mid 30's. That's exactly what we got today and stocks responded.

The rubber band snapped back when the VIX topped out near 39...

So now what? Is it all clear? Can you jump headfirst into tech?

Unfortunately, it's not that simple, even know you will hear a lot of investors calling a bottom after today's price action, the reality is no one knows for certain.

For now, it's a good start but follow-through will be key and with MSFT, TSLA, and AAPL reporting earnings this week one thing is for certain, it will be volatile.

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.