After seeing the S&P 500 fall 3.5 percent two weeks ago and watching the CBOE Volatility Index (VIX) jump 78 percent that same week, I expected to see more of a fall in the VIX this past week.
The S&P 500 all but erased the loss from two weeks ago with a gain of 3.41 percent last week. Comparing apples to apples, you would have expected a 3.4 percent gain in the S&P 500 to result in a similar move to the downside by the VIX, but that was far from the case.
The VIX did fall last week as the market rallied, but it only fell 21.8 percent, a far cry from equaling the move to the upside the previous week.
Looking at the other sentiment indicators, the AAII Sentiment Survey seems to be lagging behind by a week.
While the market was falling two weeks ago, investors became more bullish. Last week's report showed a decline in the bullish percentage and an increase in the bearish percentage. The ratio of bulls to bears fell from 2.02 to 1.44.
The 21-day moving average on the CBOE Equity Put/Call Ratio continued to climb last week despite the big gain for the S&P 500.
The moving average jumped from 0.6162 to 0.6467, the third straight week the moving average has increased, which suggest that option traders are becoming a little more cautious.
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