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Sentiment Indicators

Sentiment Indicators. By Stacie Shapiro. Sentiment Indicators. Vix Advance decline line McClellan Oscillator AAII investors survey Put/call ratio Many others: Specialist’s short ratio Mutual fund liquidity ratio

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Sentiment Indicators

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  1. Sentiment Indicators By Stacie Shapiro

  2. Sentiment Indicators • Vix • Advance decline line • McClellan Oscillator • AAII investors survey • Put/call ratio • Many others: • Specialist’s short ratio • Mutual fund liquidity ratio • http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:introduction_to_mark

  3. Vix • Vix is the ticker symbol for the (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. • There are three variations of volatility indexes: the VIX tracks the S&P 500, the VXN tracks the Nasdaq 100 and the VXD tracks the Dow Jones Industrial Average. • Why is it called the fear gauge? • During periods of financial stress, which are often accompanied by steep market declines, option prices - and VIX - tend to rise. The greater the fear, the higher the VIX level. As investor fear subsides, option prices tend to decline, which in turn causes VIX to decline. • More details http://www.cboe.com/micro/vix/faq.aspx

  4. Vix as contrarian indicator

  5. ADVANCE DECLINE LINE • Daily breadth: • Measures participation in a move • Every day that stocks  are traded, financial publications list the number of stocks that closed higher (advances) and that closed lower (declines). • Advance-decline line (cumulative breadth): • Advances minus declines is then plotted with a smoothing average • An AD Line that rises and records new highs along with the underlying index shows strong participation that is bullish. An AD Line that fails to keep pace with the underlying index and confirm new highs shows narrowing participation.

  6. Uses of Adv/dec line • Trend • Divergence

  7. McClellan Oscillator • Breadth indicator derived from Net Advances, the number of advancing issues less the number of declining issues. • Created by applying 2 moving averages the exponential 19 and 39 day. Then the oscillator is created by subtracting the 39-day exponential moving average from the 19-day exponential moving average. • It is a momentum indicator similar to MACD • Examples of use: http://stockcharts.com/school/doku.php?st=mcclellan&id=chart_school:technical_indicators:mcclellan_oscillator

  8. AAII http://www.aaii.com/sentimentsurvey

  9. Put Call Ratio • Put/call ratiois a technical indicator demonstrating investors' sentiment.The ratio represents a proportion between all the put options and all the call options purchased on any given day. • Sentiment is deemed excessively bearish when the Put/CallRatio is trading at relatively high levels, and excessively bullish when at relatively low levels. • Over 1 – put volume is greater than call and visa versa and considered more bearish. • http://stockcharts.com/school/doku.php?st=put+call+ratio&id=chart_school:technical_indicators:put_call_ratio

  10. Put Call (Con’t) • Used as a contrarian indicator to gauge bullish and bearish extremes. • A Put/Call Ratio at its lower extremities would show excessive bullishness because call volume would be significantly higher than put volume. In contrarian terms, excessive bullishness would argue for caution and the possibility of a stock market decline.

  11. Moon Cycle

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