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Go to: Top | Short-term Outlook | Int-term Outlook | Equity Updates | Indicator Summary | Commodity Updates
Short-term
Outlook (1-5 Days):
Go to: Top | Short-term Outlook | Int-term Outlook | Equity Updates | Indicator Summary | Commodity Updates
Intermediate-term Outlook (1-3 Months):
Today's Update: We will remain Neutral for now.
Why: On
April 15th, the Dumb Money pushed up to 75%, and the
spread between that and the Smart Money reached to -45%.
In addition, we got a tremendous surge in the number of
bearish (for the market) Indicators At Extremes.
After we got the expected weakness and volatility exploded
higher, we experienced a very unusual situation with the "shock
day" on May 6th. We looked at somewhat similar days
on
May 7th, and the conclusions were clear - a
short-term rally was likely, probably being capped at a
62% retracement of the crash, then a re-test of the
panic lows. In late May, we looked at
quite a few bullish intermediate-term studies - we got
a major surge in pessimism, then several positive breadth
thrusts and positive price performance, all in the context
of an ongoing bull market. After a brief respite, June 4th's Payroll Report kneecapped
the rally attempt and took us to a new closing low.
In the process, we've seen very
oversold conditions and some give-up among
Rydex traders and
individual investors, so we'll be looking for the price
action to improve to re-establish a bullish outlook.
That would include either a successful test of the recent
lows, or a recovery high above 1120 to break the recent
pattern of lower highs and lower lows in the S&P 500.
Recent Studies:
No Fidelity funds better than cash (7/06):
Bullish
Rydex traders giving up (7/07): Bullish
AAII survey shows low bullishness (7/08): Bullish
Sentiment:
Trend:
Back to mostly neutral readings.
Mixed long-term trend signals. Sup /
Res:
Other:
R: 1140; S: 1040 Nothing notable.
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Short-term Outlook
| Int-term Outlook |
Equity Updates |
Indicator Summary |
Commodity Updates
Equity Indicators - Updates and Extremes
Investor's Intelligence Bull Ratio During the spring, one of the more troubling of our
sentiment indicators (among many at the time) was the exceptionally
bullish attitude of newsletter writers. More than 75% of them were
optimistic on the market's prospects. Over the past few months as the market has cooled off,
the Bull Ratio (Bulls / (Bulls + Bears)) in the Investor's Intelligence
survey has steadily lost steam too. During the past couple of
weeks, it has picked up the pace, and this week dropped under 50% for
the first time since last April. Which means there are now more
bears than bulls. For them, that's a relatively quick change in sentiment
from such bullishness to relative bearishness. Let's go back and see if it has meant anything special
in the past. The table below shows each occurrence since 1969 when
the Bull Ratio was at least 75% at some point during the past four
months, then tanked to under 50%, and the performance in the S&P 500 the
given number of weeks/months later.
Date 1
Week Later 2
Weeks Later 1
Month Later 3
Months Later 6
Months Later This was a rare occurrence, and led to inconsistent
market behavior going forward. While the S&P was positive 6 out of
8 times a couple of weeks later, there weren't any especially big
rallies (or declines). But by one and three months later, only 3 were positive
and there were a few large drops in there (some large rallies, too). Overall, I don't
see a basis for exclaiming that this is a bullish (or bearish, actually)
give-up among newsletter writers. We'd have to see a larger drop
in the Bull Ratio for me to get excited over the potential positive of
too much pessimism from this group. While the
Investor's Intelligence survey isn't very noisy on a week-to-week basis,
and it takes time for that group to change their collective opinion, the
individual investors that respond to the AAII survey show no such
reservations. That is amply
evident this week, as they swung from an extreme in pessimism to a more
neutral position. This one-week change in the Bull Ratio of +24%
is one of the largest we've seen since the survey's inception in 1987.
There was only
one week in history when the Bull Ratio went from below 30% one week to
over 50% the next. That was April 20, 2005, which was the week the
market formed an intermediate-term bottom and chugged steadily higher
for three months. Like we did
above, let's go back as far as we can and see how the S&P 500 fared
going forward when we saw at least a 24% one-week jump in the Bull
Ratio. The table is ordered with the weeks with the largest jump
in the Bull Ratio on top.
Date
Bull Ratio
Chng In Bull
Ratio 1
Week Later 2
Weeks Later 1
Month Later 3
Months Later 6
Months Later There wasn't much of an edge here, either. Again,
the most consistent performance was two weeks later, with a bullish bias
- the jump in optimism seemed to serve the investors well. But several of those rallies stalled out soon
thereafter, and fell back during the next couple of months. By six
months later, there were actually more down weeks than up. Once again, I don't see any huge edge to the fact that
we saw such a big jump in bullishness. It really doesn't seem to
be the bearish omen that we'll likely hear trotted out by those with a
bearish outlook today.
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Short-term Outlook
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Equity Updates |
Indicator Summary |
Commodity Updates
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Equity Market Indicators
Notes: In mid- to late-May, we saw as many as 40% of our indicators at a bullish (for the market) and as little as 0% at a bearish one. That was the widest spread since March 2009, though it has gotten as high as 50% - 70% at some of the true panic lows over the years. On June 29th, we got another spike in bullish indicators above the 30% level...but again it's below what we've seen at many of the prior major lows.
More history:
* New extreme
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Bonds, Commodities and Currencies - Updates and Extremes
Nothing notable for today.
Jason Goepfert Founder, Sundial Capital Research, Inc.
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July
15, 2010,
7:30am EST
Neutral
Since June 24, 1067
SPX
Bullish For The Market
