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Friday, October 18, 2013

Emotions are high

The market has been shifting back and for between bull and bear mode in an unusual way.  It has been flying up and down through the 18 DMA like it was not there.  Here is another look at the emotions that are present.  Check out the Nova/Ursa ratio chart.

From the Nov. low to May of this year the ratio shows most of the spikes on the upside.  It also spent most of the time positive.  Starting in May it shows very big spikes in both directions.  Today's spike being the biggest one yet.  People are switching back and forth from bull to bear funds like crazy.  I wish I had more experience looking at this chart.  In the 18 months or so I have been watching it I have not seen anything like this.  Lets look at the longer time frame version.

This chart goes all the way back to 2006.  In all that time it has never gotten as wild as it is now.  Those upside spikes are really abnormal.  Something odd is going on.  I wish this chart had more history.  We can see some increase in the upside spikes in 2007, but we can't see far enough back to see if that was unusual or not.  It seems like this might be a sign of a major top forming, but I don't have enough data to be able to say that.  I don't think it is a stretch to say this is a sign that emotions are rising and that could easily lead to an increase in volatility.  Volatility can increase in the market while going up or down.  Most often it is while going down, but not exclusive.  I have a feeling things are going to get wilder. 


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