Morning Notes — Risk Skewed to the Upside

Today’s release of the weekly AAII US Investor survey resulted in bearish sentiment reaching 51.31, which exceeds the extreme levels of 50.4 from 12/27/18. Recall on Monday, the CBOE Equity Put/Call ratio reached 1.12, just 2bps from its all-time record high of 1.14 from 12/21/18. The American Association of Individual Investors measures sentiment of a highly emotional investor class. Option investors are also considered emotional, which makes them wrong at extremes. We’ve officially reached bearish extremes and de-risked equity markets to a great extent. But before adding broad equity exposure, we’ll wait for price trend deceleration and signs of seller exhaustion. Note the cumulative advance/decline line for the S&P 500 failed to make a new low yesterday. Today’s close is important.