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Short-term
Outlook:
Short-term Strategy
What: We'll maintain a 25% Bearish outlook
unless the S&P 500 e-mini is trading above 1115 after the
first hour of trading on Friday.
Why: We've touched on a few different
short-term warning signs over the past week, which is why
the continued focus on short-term weakness instead of
looking for a sustained breakout. Yet another downside
reversal on Thursday helps confirm that view, but Friday's
jobs report can obviously be a game-changer. Per
usual, an extreme reaction to the jobs number is often a
good "fade", particularly using the day's close - meaning
that a big up day will most likely lead to some weakness
next week while a big down day would probably lead to at
least a temporary rebound.
Sentiment:
Trend:
Most of our shortest-term guides have moved back to neutral. Still in that
1085 - 1110 range. Support/Resistance:
Other Tendencies:
Resistance is still tough
near 1110. Nothing notable, but a strong
reaction to the jobs report is most often a "fade".
Intermediate-term Outlook:
Intermediate-term Strategy
What: We will remain neutral for now.
Why:
In March,
we discussed a large number of reasons to expect an imminent rally
of one to three months' duration, or perhaps even more.
We've had ample opportunity to discuss the historic
momentum since that low, and have seen little reason
since to expect anything other than short-term
corrections. In
late October, we looked at
some "toppy" kinds of studies, and after those warning signs the S&P broke
its uptrend line from March.
However, during that late-October correction, traders quickly
became bearish and the market convincingly bounced
back - that's healthy behavior. The recent
failure to hold the 1100 breakout area is something to
watch carefully given the "topping" warning signs and a
surge in
speculative activity, especially as we look to challenge
that 1110 area yet again.
Sentiment:
Trend:
Smart/Dumb Confidence Spread is neutral.
The S&P has a rising 200-day average and a series of
higher highs/higher lows. Support/Resistance:
Other Tendencies:
Resistance is still tough
near 1110. Pullbacks after highs
have been positive, but we've seen some "toppy"
kind of behavior.
Equity Indicators - Updates and Extremes
Odd lot trades
are those for 100 shares or less, and is a reflection of the sentiment
of very small traders. Since the March low, when more than 75% of
odd lot volume is for purchases (instead of sales), the S&P has suffered
a 1% or more drop within a few days nearly every time. It just
triggered that extreme two days ago.
Already, though, these traders have become nervous and are close to
moving down to under 35% purchases, which would be a decent short-term
buy signal.
The latest
updated from AMG Data shows another week of tepid flows to equity mutual
funds, which suffered a second straight week of outflows. That
marks the fifth week out of the past six that investors have shown a net
withdrawal out of equity funds (excluding ETFs). Unlike for bonds
(see below), there is little evidence of excessive optimism here on a
longer-term time frame.
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Equity Market Indicators
Notes: Corporate insiders and the various sentiment surveys continue to be the more worrisome indicators among the broad groups that we follow. Most of the others are either neutral or slightly bearish (for the market). Among individual indicators, we continue to watch most closely for scenarios where 0% are bullish and 30% or more are bearish, which has been a very consistent predictor of short-term weakness ahead since March.
More history:
* New extreme
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Bonds, Commodities and Currencies - Updates and Extremes
Bond Fund Flows Coming on the heels of a Bloomberg report that some pension funds are switching almost entirely to bonds from stocks, the latest AMG Data shows yet another reading of more than $2 Billion flowing into taxable bonds...for the 31st consecutive week. It's by no means a precise timing indicator, but if the LQD or HYG funds show another 5% premium to NAV anytime soon, it seems like a decent shorting opportunity (both are currently showing premiums of around 2%).
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For December
4, 2009
25% Bearish As of Dec 3,
1102
SPX
