Momentum and Sentiment - GOLD, SP-500

*
Tonight's post will revisit the subject of sentiment, look at how the current sentiment of both gold and the stock market compare with recent price action and also consider the momentum that exists going into tomorrow's Friday trade.
*
This first chart is today's put/call ratio from Schaeffer's Research for the gold ETF (GLD).  No surprise to us, those pesky gold bears have found themselves on a very hot frying pan since the July 28 bottom in Gold....and have been fleeing to the bull camp as fast as they can get there.  
*
Indeed, such a large number of bears ultimately threw in their towels so fast, one has got to wonder if there are many undecided ones left.  If not, then it would be a good time now to reset sentiment with a price correction in gold.  
*
Click on the charts to ENLARGE

*
The second chart is an up to the minute look at the 4 hour chart of cash Gold.  What is apparent is that when momentum begins to roll over, price usually takes quite a tumble.  We seem to be in that position currently, but momentum is still quite high above ZERO.  It will be interesting to see how much higher, if at all, gold can go from here.

*
The third chart is this week's data released by Investor's Intelligence today.  It shows in the last week fully 5% of the bulls decided to rejoin the bear camp.  
*
The orange circle coincides with the SP-500 bottom at 1010.  With today's data we calculate that bullish sentiment has barely budged since the 1010 bottom, yet the SP-500 is already some 70 points higher.  
*
What this tells me is that the natural swing from the bearish extreme to the bullish extreme in sentiment (and therefore price) has not nearly run its full course. ie. there is much more upside and little risk on the downside.

*
This chart gives you a sense of the size of sentiment swings that have been normal over the past 4 years.  Most swings in sentiment have been in the 15-19% range.  Thus far, we have only progressed in bullish sentiment by 5%.  My hunch is that before this stock market rally is complete, bearish sentiment will retreat from its current reading of 31.1% to something in the neighborhood of 20.0%.

*
Our final chart this Thursday evening is a 4 hour chart of the SP-500.  The most striking thing to me, as I consider the chart from a momentum standpoint, is to see a HUGE positive divergence ready to take price higher at any time now.  Price is at the retest of 1077, but momentum is almost at the ZERO crossover - not 10,000 leagues beneath the sea as before.