August 16, 2011

We are long QQQ (QQQ).   Some accounts we advise are also long SPY and DIA.

As long time readers know, I follow the ZYX Change Method. The method combines fundamental, quantitative, and technical analysis. From a fundamental and quantitative point of view, the stock market is not expensive and should move up. However, the sentiment component of the technical screen of the ZYX Change Method is flashing caution.

For us, sentiment is an important indicator. We use a proprietary sentiment indicator that is a composite of the following:

• Emails from our subscribers and clients
• AAII Survey
• Option skews
• Put call ratios
• Put call open interests
• Money flows

   The following table describes how the sentiment is interpreted at The Arora Report (click to enlarge images):

 Bottoms are formed when sentiment gets extremely bearish.… Please click here or the title below to read more.