Monday, January 7, 2008

The triangle consolidation has been broken

I noted in the daily updates last week that sentiment has been sharply split between the bulls and bears with very few neutral players. The Investors Intelligence survey as opposed to the AAII survey showed the same thing. Namely one survey showing extreme optimism and one extreme pessimism. Note the Ticker Sense poll this week. This was manifested in the triangle consolidation that formed in the S&P. When this kind of extreme polarization in sentiment is finally resolved what normally happens is a big move in the direction of the winning side as the losers have to capitulate. So far this is exactly what's happening as the S&P as accelerated to the downside after the break.