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Investor Sentiment: Lack Of Conviction?
Investors
remain bearish, and buying into last week's weakness continues to be the right
play -- so far. However, a positive outcome is far from certain especially
since there is an apparent lack of conviction amongst the "smart money".
Nonetheless, this is our "fat pitch" especially since we have defined our downside risk and
where a failed signal might occur. Despite these concerns this is a dynamic
market environment with the potential for big gains.
{click on the graphs to view larger images}
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Eventually sufficient numbers of the dumb money crowd will have the necessary epiphany to preserve enough capital to seed the next bull market. Unfortunately a Monty Pythonesque version of the economy, where we grovel on our hands and knees in a shit strewn world whilst discussing anarcho syndicalist communism is also a possibility.
Strange women lying in ponds distributing swords is no basis for a system of government.
Well, I guess I will always be just a dumb money amatuer because on a risk reward basis the only way to go that I can see is short. Going short at least I can set stop limits and know they won't get blown through by a couple hundred points in the time it takes to go for a leak.
Fish: What's creepy is not rising asset prices in a manipulated money-printed environment, but rather the environment itself.
Yes, they look at your hand. That's why IMO trading is a mug's game except for pros. People should consider whether they really do or don't want to be a tiny minority fractional owner of someone else's business for the long haul. My answer increasingly is no.
I have a creepy feeling that the market has turned up again. All the bad news is still out there. One has to remember that the stock market is not just a game of liars poker, but that the other (large) players now get to look at your hand as well.
Fish,
That creepy feeling is not the market, it is sovereign debt default.
Mark Beck
The market is a political tool. Obama needs to keep it pumped, the Fed needs to engineer the occasional "crash" to muscle legislators on important matters (to them). All else is fantasy.
Get the committee schedules that affect the Fed and trade accordingly.
Perhaps, perhaps not. I could think of a few convictions I'd like to see, however.
Um... if "market bottoms are forged" when dumb money is bearish, I wonder if technicaltake would mind explaining how all that dumb money bearishness in Figure 4 was wrong in 2007 and 2008 when the SP was in the 13-1400 range? Did the SP not get cut in half shortly after?
I mean... it seems to me that the author is using charts that overwhelminly disagree with the point they're trying to make...
IE: If you are looking for the perfect indicator you will be sorely disappointed with this and with anything else out there; the key is understanding the significance of failed signals. But until we have a failed signal, extremes in bearish sentiment should be bought. Once again, think about this as card counting in 21. You play when the opportunity for large gains are in your favor; you move to the sidelines or bet lightly when the cards are stacked against you --like 12 weeks ago! (I am sure you were buying the BS at the top). This is not a guarantee that you will win every hand.
Failures are part of the game, and they do have significance.
I don't know what you mean by the comment about buying at the top. I've been mostly in cash & treasuries since 2007. I was definitely buying a little at the recent top... but what I was buying was inverse ETFs with my "fun-money"... lol. Made a little money - but my stop-losses (set to keep me in the green) will kick in if we see another day or two of gains... darn.
Anywho... I appreciate what you're saying in principle ... and I'm not expecting to find a perfect indicator. But I still don't see how anyone could look at the dumb money record in the last few years as you present it, and then use that picture to try and make a case that the dumb money will be wrong on the trend. Maybe you're looking at the dumb money as a shorter-term indicator than I am.
Lack of conviction eh? Funny how a flash crash does that to people.