"TAP não sobrevive se se mantiver pública", garante Pinto Luz

[Ulisses Pereira]

"Sentiment Watch"

By Helene Meisler
RealMoney.com Contributor
8/31/2010 7:00 AM EDT

"When we looked last week at the chart of the percentage of bulls from the American Association of Individual Investors' weekly survey, I noted that I couldn't recall so many others fussing over this data. At the time I had counted at least three folks showing this data on television. In the past two days, there were two more.

When it comes to sentiment, I am always keen to be a contrarian. But I admit I am shocked at how many folks are citing this one particular survey. I certainly do not recall any of these same folks fussing over this survey when the bears were down at 22% in January.

Keep in mind that this is just one survey and it is best used when it arrives in conjunction with other sentiment indicators saying the same. Again, as I noted last week, the Investors Intelligence readings are not extreme but are getting close, but that's only when you add the bears plus the corrections. The bulls and bears on their own aren't showing extremes. That might change when the results are reported on Wednesday but they aren't there yet.

In addition, the weekly Market Vane survey shows 42% bulls -- not bad considering it was at 50% the second week of August. The July low, however, had 39% bulls.

So the bottom line is that this AAII reading is ultimately bullish but thus far it's the only place we see such an extreme. I expect that could change as we head into September.

As we have come to learn, the final days of the month are not always the days we see markups. I even posited that perhaps last Friday's rally was some form of marking up. Therefore, anyone expecting markups for the final day of the month might be disappointed. However, the early days of the month do tend to bring about some sort of rally.

We are still in oversold territory, although not nearly as oversold as we were last week. It would not surprise me to see some sort of early-month rally later this week.






Once again I'll note that the intermediate term isn't yet oversold. It continues to appear to me as though sometime midmonth the 30-day moving average of the advance/decline line will get oversold; that's still about two weeks away. If we find sentiment is quite bearish at that time -- it would be even better if no one yapped about it the way they're doing now -- we could get an intermediate-term low.

Keep your eyes on the number of stocks making new lows. Last week there were 255 new lows on Nasdaq and 177 on the New York Stock Exchange. If we break those lows in the indices and we have fewer new lows, we'll have another positive divergence. As we get closer to an intermediate-term oversold reading these potential positive divergences will become more important, as will sentiment. "

(in www.realmoney.com)