Posts Tagged ‘bullishness’

AAII: BULLISH SENTIMENT HITS 6 YEAR HIGH

Courtesy of The Pragmatic Capitalist

This morning’s AAII sentiment survey is consistent with just about every other sentiment reading of late – investors are wildly confident that stocks will be higher in the coming 6 months.  The optimism is almost near universal. The following chart tells the story of this bi-polar market.  On August 26th, just days before the market bottom, the bullish sentiment hit just 20.7% – no one thought stocks were set to rise.  Now, after a 20% rise in equities the consensus is uniformly positive.

Charles Rotblut of AAII elaborated on this morning’s results:

“Bullish sentiment, expectations that stock prices will rise over the next six months, rose 13.1 percentage points to 63.3% in the latest AAII Sentiment Survey. This is the highest level of optimism since November 18, 2004. This is also the 16th consecutive week that bullish sentiment has been above its historical average of 31%, the longest such streak since 2004.

Neutral sentiment, expectations that stock prices will remain essentially flat, declined 2.3 percentage points to 20.3%. This is a six-week low for neutral sentiment and the 20th consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 10.7 percentage points to 16.4%. This is the lowest level of pessimism since July 14, 2005. It is also the 11th time in the past 12 weeks that bearish sentiment has been below its historical average 30%.

The spread between bullish and bearish sentiment is currently at +46.9 points. This is the most positive bull-bear spread since April 15, 2004, when it reached +50.0 points. A wider differential was recorded on March 5, 2009, when the bull-bear spread fell to -51.4 points.

Bullish sentiment is more than two standard deviations from its historical mean, making it a statistical outlier. In simpler terms, bullish sentiment is running red hot. In fact, the current reading is the 18th highest since the survey started in 1987. Higher readings were recorded in 1987, 2000, 2001, 2003 and 2004. Such high levels of optimism have been correlated with a decline in the S&P 500 over the proceeding 24 weeks, though the magnitude of the declines have varied.  A spreadsheet showing all of the survey’s historical data is attached.”

Source: AAII 


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HAVE WE SEEN CAPITULATION?

HAVE WE SEEN CAPITULATION?

Courtesy of The Pragmatic Capitalist

Napoleon I receiving the Capitulation of Ulm. Battle of Ulm, 16-19 October 1805. The outcome was a resounding French victory the capture of the entire Austrian army.

We’re not even close according to David Rosenberg:

“Short interest on the Nasdaq down 1.6% in the first week of August?

The Rasmussen investor confidence index at 80.4?  Call us when it hits 50, which in the past was a “classic” washout level.

Investors Intelligence did show the bull share declining further this past week, to 33.3% from 36.7%.  But the bear share barely budged and is still lower than the bull share at 31.2%.  Are we supposed to believe that at the market lows, there will still be more bulls than bears out there? Hardly.  At true lows, the bulls are hiding under table screaming “uncle!”.

Yes, Market Vane equity sentiment is down to 46, but in truth, this metric is usually in a 20-30% range when the market correction ends.  We are waiting patiently.

As for bonds, well, Market Vane sentiment is 73%. Now what is so bubbly about that.  Call us on extreme positive sentiment when this measure of excessive bullishness is closer to 90%, and we’ll be in the correction camp hopefully by the time this happens.”

I would tend to agree.  We have seen nothing in the fear gauges that convinces me that people believe in a sustained downturn in the economy. The cult of the equity investor has spent the last several months debating the possibility of a bubble in bonds, however, almost every single person who makes these claims is an owner of stocks and I have more and more trouble finding people these days who believe in bonds.  Yet, for some odd reason there is a never ending love affair with the equity portion of their portfolio.  Perhaps the bubble they should be more concerned about is the one that has been imploding underneath them over the course of the last 10 years. 


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STOCK MARKET OPTIMISM CONTINUES TO SURGE

STOCK MARKET OPTIMISM CONTINUES TO SURGE

Courtesy of The Pragmatic Capitalist 

Sentiment data is surging this week.   The Investor’s Intelligence poll is showing a new high in bullishness and a new low in bearishness.  18.9% of advisers tracked in the polling are bearish on stocks.  Bullishness has now surged to 51.1%.   Bullish sentiment is surging versus last week’s reading of 48.9%.

The latest Merrill Lynch Fund Manager Survey is showing similar optimism.   71% of the respondents  believe that earnings will jump 10% or more over the next 12 months.  This is up dramatically from 53% in March.  The survey also showed that 52% of managers are now overweight equities versus just 33% in February.  Michael Hartnett, Chief Equity Strategist at B of A Merrill Lynch says the Goldilocks scenario is priced into stocks:

“April’s survey shows a growing number of investors envisaging a Goldilocks scenario of above trend growth and benign inflation. The findings are consistent with the view that the US consumer, far from remaining in intensive care, is on the path back to good health.”

Today’s AAII poll showed the same trend in wild bullishness.  Bullish sentiment surged to 48.5%.  This is the highest bullish sentiment since the beginning of the year.  Charles Rotblut at AAII notes that the current skew between bulls and bears is consistent with periods prior to a pull-back, but not representing “irrational exuberance”:

“The spread between bullish and bearish sentiment is at +19. This is a level that has correlated with the past few market pullbacks, though is not a level that suggests irrational exuberance.”

aaii1 STOCK MARKET OPTIMISM CONTINUES TO SURGE

Source: AAII, Investorsintelligence.com 


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THE 2 BIGGEST RISKS TO THE BULL MARKET

THE 2 BIGGEST RISKS TO THE BULL MARKET

Courtesy of The Pragmatic Capitalist

This is a re-post from an article we wrote for TheStreet.com:

The rally off the March 8th lows has been nothing but spectacular.   In hindsight, it’s clear that investors overreacted to the downside, but as stocks surge more than 50% it’s time to begin pondering whether the current rally is a bit ahead of itself.  Contrary to my bottom call on March 8th when I said it was time to invest in risky assets (a full history of my 2008/9 calls can be found here including our 2008 crash call and March 8 buy call), now is the time to put on your risk management cap on as a number of various threats begin to pop up across the market.    I recently turned near-term bearish on stocks due to 2 primary reasons: sentiment & seasonality.

1)  Sentiment – As I often say, psychology drives markets.  After months of skepticism regarding the rally we are finally beginning to see an overwhelming amount of bullishness.  This is a screaming contrarian indicator.  The latest consumer confidence readings showed a marked jump to 54.1 and bullish sentiment among fund managers has soared to its highest level since 2003:

The latest Merrill Lynch fund managers survey shows an extraordinary jump in optimistic sentiment.   The survey makes up the current psychology of 204 portfolio managers running over $550B in assets.  The report shows a 63% jump in sentiment since July and the highest reading since November of 2003.

After months of short squeezes and failed market declines this optimistic sentiment has begun to eat into one of the fuels of this rally: short sellers.  Recent short sales data shows the lowest readings since the market tanked in early February.  As we lose the short sellers we lose an important driver of higher prices.

BESPOKE THE 2 BIGGEST RISKS TO THE BULL MARKET

Perhaps most important has been the enormous shift in analyst estimates.  After turning bearish in early June, I reversed the position in early July for one reason – earnings.  My analysis led me to believe that estimates were far too low primarily due to the fact that analysts were not accounting for cost cuts.  The estimates have been outrageously low, but now as the consensus begins to believe in a full blown recovery the


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Kimble Charting Solutions

Banks Creating Pattern Similar To 2007 Highs?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The left chart above looks at the Bank Index (BKX) over the past 13-years. In 2007, the index diverged with the broad market as it was creating a bearish descending triangle. Once support of the descending triangle broke, selling pressure ramped up. This pattern took place while “interest rates were actually moving higher, which is often good for banks.”

This year the bank index has been diverging from the broad market while forming a bearis...



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Zero Hedge

Italian Bonds Slide After Official Warns Credit Rating Downgrade Possible

Courtesy of ZeroHedge. View original post here.

After starting off strong, Italian 10Y Yields have leaked wider all morning after a senior government official said on Wednesday that Italy’s 2019 budget may be rejected by the European Commission and a credit rating downgrade is also possible.

"Let’s say that the premise is there" for the commission to start an infraction process over the budget, Stefano Buffagni, cabinet undersecretary for regional affairs...



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Insider Scoop

Marvell Holds Attractive Risk-Reward, BMO Says In Upgrade

Courtesy of Benzinga.

Related MRVL Benzinga's Top Upgrades, Downgrades For October 16, 2018 The Week Ahead: Q3 Earnings Season, Canada Decriminalize...

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Digital Currencies

Tether Tumbles Below Critical $1 Threshold As Dollar-Pegged Crypto Doubts Soar

Courtesy of ZeroHedge. View original post here.

Update: Careful to quickly assuage any potential loss of the narrative and 'full faith and credit' of the 'stablecoin', Tether released a statement on USDT drop:

"We would like to reiterate that although markets have shown temporary fluctuations in price, all USDT in circulation are sufficiently backed by U.S. dollars (USD) and that assets have always exceeded liabilities."

See, nothing to panic about.

*  *  *

The only cryptocurrency not rallying right now is the one pegged to the U.S. dolla...



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Chart School

Weekly Market Recap Oct 14, 2018

Courtesy of Blain.

Wednesday and Thursday finally brought some fireworks to a very complacent market.   The S&P 500 had not had a 1% move in 74 days until Wednesday’s drawdown.

Rising yields were nailed as the culprit but months of rallying eventually require some sort of shake out – whatever the catalyst.  Wednesday’s sell off was the worst day for the S&P 500 since February and the worst for the NASDAQ since June 2016.

The market losses are “a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “Higher interest rates typically bring on tighter ...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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