Technical Indicators— Sentiment indicators

Sentiment indicators attempt to gauge investor activity for signs of increasing bullishness or bearishness.

Opinion Polls

Technicians look at prior market activity and compare it with highs or lows in sentiment, as well as inflection points in sentiment, as a gauge when they are forecasting the future direction of the market.

Put/call ratio is the volume of put options traded divided by the volume of call options traded for a particular financial instrument. Normally below 1.0. Considered contrarian indicator.

At extreme lows, market sentiment overly positive, correction is likely.

At extreme highs, market sentiment extremely negative, an increase in price is likely.

The CBOE Volatility Index (VIX) is a measure of near-term market volatility calculated by the Chicago Board Options Exchange.

The VIX rises when market participants become fearful of an impending market decline.

When other indicators suggest that the market is oversold and the VIX is at an extreme high, this combination is considered bullish.

Margin debt.

When stock margin debt is increasing, investors are aggressively buying and stock prices will move higher because of increased demand.

Rising margin debt is generally associated with a rising index level, and falling margin debt is associated with a falling index level.

Short interest.

The number of shares of a particular security that are currently sold short is called “short interest.”

Short interest ratio = Short interest/Average daily trading volume

Opinions differ about how to interpret short interest as an indicator.