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Investor Sentiment: Are We There Yet?
Like my whiny children, who after 30 minutes into a 6 hour car drive, investors are asking themselves, "Are we there yet?" After all, the SP500 is down a little over 8% from their highs in the past 3 weeks, and investors want to know if the selling is done and if this is a time to buy. Of course, it was only 3 short weeks ago that we were hearing how this market was a buying opportunity of a lifetime, so if you were dumb enough to buy that nonsense, then consider yourself lucky as equities are now on sale. Wow, what a bargain!
Looking at the sentiment picture, we are no where near a durable bottom that will lead to a sustainable price move. There are very few bears out there. Market bottoms occur when investors are bearish, and sustainable rallies start with short covering and with a lot more investors on the sidelines ready to chase prices higher. These conditions do not exist in any aspects of the data. Let's be very clear here. The market is very oversold, and I am sure a "dead cat" bounce is in the works. If your modus is to capture the next 2-3%, then by all means have at it. Beyond that, I don't think that we are there yet!
The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator is now neutral.
Figure 1. “Dumb Money”/ weekly
Figure 2 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: "Market-wide sentiment turned positive last week as buyers outnumbered sellers for just the second time this year (and first time during a high volume week). The number of buyers jumped nearly 63% week-over-week while the number of sellers fell more than -28% over the same period. Small and mid-caps from the Russell 2000 continued to be the main positive sentiment driver as sentiment within the S&P 500 was more mixed. The Financial, Technology, Industrial Goods and Consumer Discretionary sectors each showed buy biases. Activity remained rather limited within the Materials and Energy sectors, and, there were more neutral readings of sentiment in the Healthcare, Utilities and Consumer Staples arenas. Qualitatively and on a company-level, we're seeing much more actionable buying than actionable selling and we've been pleasantly surprised to see buying crop at companies coming off of well-received earnings announcements. "
Figure 2. InsiderScore “Entire Market” value/ weekly
Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall. Currently, the value of the indicator is 69.07%. Values less than 50% are associated with market bottoms. Values greater than 58% are associated with market tops. It should be noted that the market topped out in 2011 with this indicator between 70% and 71%.
Figure 3. Rydex Total Bull v. Total Bear/ weekly
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Maybe you should spend more time with your kids rather than your silly charts
Hey Haddock
Look at the track record; I am sure you were buying at the top or you spend most of the time sitting on the sidelines wondering what to do after you have taken yourself out of the market after a 2% move
at to whiny children - as to ring lardner - as to bennie and timmie having the correct response - 'shut up he explained'.
shut up and enjoy the ride, whether you like it or not. we're driving and you aren't
Maybe this bounce is getting harder to fuel on rumors than the last time they lied. Plus everything is a little worse and the market is a little higher than last time. So, maybe it has to drop a little more. Like everything worldwide except in the US stats is blowing up or I mean down. Perhaps this time is too dangerous to gamble. Like maybe the Morgue's gambling set off another ice-nine and this time its all going to freeze. This time we are going to war instead. Gotta get that Nobel Peace Prize winner from Kenya re-elected.
The bounce was fuelled by expected inflation rocketing. It did go up but not enough to keep the markets at these levels.
What people seem to forget is that inflation causes sales to drop, revenue stay the same but the bottom line to crash.
So what we actually need to see now is wage increases and not extra inflation expectations like QE3
I just watched this series "maxed out" about a couple with 3 kids.
Dad worked 3 jobs totalling 60 hours a week, mom worked 2 jobs 44 hours and they have 3 kids. That's not life!
Just to have a nice car and house?
And that's the current society! That's a timebomb!
We talk about jobs, but watching that series I thought: there's enough jobs if everybody takes 1, the pay is just to little to let people live the lifestyle they think they need.
After watching that series I do believe we as a society are going down.
3 jobs TOTALLING 60 hours a week. What a slacker. When I put in JUST 60 hours at a single job its an easy week.
Historically people worked 12-16 hours a day 6-7 days a week. They slept maybe 6 hoira a day, because thats when you were most likely to ne killed. While sleeping. This idea that people should be able to work just 40 hours a week with 6+ weeks off, with mom staying at home, living in a 5,000 sq ft mcmansion and retiring at 50. Lazy entitled morons...
Real middle class wages are going down in the West due to globalization. Meanwhile, relentless advertisements in print and TV telling us all to consume and a culture that measures success by material possessions causes people to spend money they don't have. I don't see how it ends any other way than badly. The middle class is shrinking steadily and yet entire generations are convinced that the only true goal in life is to have a McMansion and an Escalade.