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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 move to 25% Bullish if
the S&P 500 closes above 1100, and subsequently turn back to
Neutral if it then closes below 1060.
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 1100 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
Wall Street Strategists' Stock Allocation Analysts and
strategists on Wall Street take a lot of grief, when taken in aggregate,
for being late to recognize trends and for simply being too bullish in
general. A considerable
amount of academic ink has been spilled discussing the topic, and for
the most part it has made (or saved) investors more money to ignore what
they have to say than to follow it. There are notable exceptions,
of course - there are some excellent ones out there - we're just talking
about in aggregate. Recently, while
the S&P was busy sinking nearly 10% to multi-month lows, Wall Street
strategists were busy hiking up their expectations, suggesting that
clients put more money into stocks than any other time during the past
year. The chart below
shows the other times during the past five years that strategists were
bitten by the "buy the dip" bug, moving to a new one-year high in their
suggested allocation to stocks, while those stocks were at or within a
few weeks of sinking to at least a three-month low.
Surprisingly,
those ended up being pretty decent intermediate-term suggestions, as the
S&P moved higher each time. Of course, the gains were also given
back each time while the suggested allocation to stocks was still near a
one-year high, but hey we should at least given them some credit for the
initial timing. The table below
shows all other unique occurrences since 1997 when their stock
allocation hit a one-year high while the S&P was at or within a few
weeks of a multi-month low.
Date 1
Week Later 1
Month Later 3
Months Later 6
Months Later We can see that
the past few instances were pretty good, at least looking out over the
next month or so. Prior to
that...not so much. While these guys and gals did well by boosting
their allocation to stocks prior to the big intermediate-term rallies in
the fall of 1998, the spring of 2001 and following 9/11, they were also
exceptionally bullish from the year 2000 all the way through 2001 as the
S&P continued to sink month after month. They reached
their peak allocation to stocks (suggesting that investors put 72% of
their money into equities) in April 2001, which was not great timing.
And they were at their lowest allocation (near 50%) in May 1997 and May
2009, which cost investors heavily in terms of lost opportunities. So by no means
should be believe that these folks are good forecasters, in aggregate.
It's just that the last few times, at least, when they've bumped up
their allocation to stocks as those stocks have sunk to multi-month
lows, they've been able to enjoy several weeks of looking pretty smart.
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Short-term Outlook
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Equity 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
22, 2010,
7:30am EST
Neutral
Since July 20, 1057
SPX
Bearish For The Market
Bullish For The Market
