Bearish Sentiment Officially Reaching Fever Pitch
by ilene - August 27th, 2010 4:09 am
Bearish Sentiment Officially Reaching Fever Pitch
Courtesy of Joe Weisenthal at Business Insider

Image: George Eastman via Flickr
Friday promises to be a huge day (at least in the early going) with both the Fed and the Q2 GDP revisions potentially giving investors more reasons to panic. The questions: is panic hitting peak levels?
Mike O’Rourke at BTIG argues that we must be close:
The other interesting development today was on the sentiment front. AAII Sentiment as we calculate it (Bulls/(Bulls + Bears)) was 29.54% in buy signal territory. It is not as good as the reading registered last month, but good enough to rank it 4th best in the last two years following November 6, 2009’s reading of 28.57%, July 9, 2010’s 26.84% and the two decade low registered March 6, 2009 at 21.21%. The Hindenburg Omen made it to the front of our Yahoo! News page. A six basis point increase in the quarterly report of the Mortgage Bankers Association’s 30 day delinquencies was covered in the media as if the second sub-prime crisis was again upon us. Besides the fact that it was 6 basis points, it is coming primarily from failed modifications. We get monthly snapshots from Lender Processing Services and Bloomberg so there are no shocking revelations in the MBA report, which overall exhibited improvements. Meanwhile, positive stories seem to get missed, such as Moody’s asserting yesterday that credit card losses have peaked even if Unemployment rises to 10%. In addition, Moody’s noted that “Falling charge-offs led to excess spread widening by 57 basis points to 10.44% in July, breaking the 10% level for the first time in the 20-plus year history of Moody’s Credit Card Index.” This is the good type of spread widening. It represents the profits banks make on a card program.
There are only two things we feel like we are missing going into tomorrow’s GDP report: Volume and a 30+ reading on the Vix. The ideal setup for tomorrow would come from the result of an ugly Q2 GDP revision tomorrow. Every hour, a tenth of one percent comes off the market’s expectations of tomorrow’s revision. It is hard to remember the last time the market was so enamored with a backward looking number. We recognize a large downward revision will
Bearish Sentiment At 22-Year Low
by ilene - January 5th, 2010 4:01 am
Bearish Sentiment At 22-Year Low
Courtesy of Adam Sharp’s Bearish News
The latest sentiment reading by Investors Intelligence shows a disturbing trend. Only 15.6% of financial newsletters are currently bearish on equities.
Last time the bearish indicator was this low was April 1987. A few months later (Black Monday) the DJIA dropped 21% in a single day:
In other words – when everything seems peachy — watch out. Turns out that peaks and troughs in investor sentiment are pretty good contra-indicators. Bullish sentiment tends to peak as bubbles are near their top, and vice versa.
From the revamped and newly Bloombergesque Business Week:
Pessimism about U.S. stocks among newsletter writers fell to the lowest level since April 1987, six months before the equity market crash known as Black Monday, following the biggest rally in the Standard & Poor’s 500 Index in seven decades.
The proportion of bearish publications among about 140 tracked by Investors Intelligence fell to 15.6 percent yesterday from 16.7 percent a week earlier. Sentiment has improved since October 2008, when the financial crisis drove the figure to a 14-year high of 54.4 percent. After plunging 38 percent in 2008, the S&P 500 has risen 25 percent this year.
This is not to say markets wont’ run again in 2010. Irrational bull markets can last much longer than you’d think. The momentum they build up is impossible to fight. Gotta wait for that to break before getting seriously short. Example – After the bearish-sentiment index bottomed in 1987, the market rallied another 14% before crashing.
Smart investors like Bill Fleckenstein have been highlighting the credit bubble since the mid-1990’s. And today markets are more irrational than ever. Government intervention is preventing market cycles from proceeding like never before.
Industries like housing, banking, and commercial real estate have become completely dependent on government support. Their future (and that of our currency) depend on whether our leaders will extend or end this support. It’s a ludicrous, manipulated market.
So far America’s leaders have repeatedly demonstrated that they have zero tolerance for economic pain. Their support for the financial markets seems unlimited, no matter the long-term cost. I don’t see that changing without something drastic hapenning – another huge round of bailouts, a shift in the political landscape, or something…