Market Sentiment 05 (Nov 17 - Dec 25)

[winston]

SENTIMENT

VIX: 16.30; +0.37
VXN: 19.93; -0.39
VXO: 17.39; +0.40

Put/Call Ratio (CBOE): 0.79; -0.06

Bulls and Bears:

One of the most spectacular moves in recent memory. Bulls dropped over 6 points while bears jumped 1.2 points. Of course, those more bearish moves pushed stocks the opposite direction

Indicator level: Fell from yellow to green, indicating the approach toward extremes did not make it and the pressure was released with the Friday rush higher in the stock indices.

Bulls: 42.7 versus 49.0 versus
Bears: 18.5 versus 17.3

Source: Investment House

[winston]

Wall Street and 'Mom and Pop' Are Both Getting It Wrong

By C. Scott Garliss

As we head into the third-quarter reporting season, Wall Street analysts are expecting S&P 500 Index earnings to fall 4.6%. That's much worse than early July, when those same analysts were anticipating only a 0.6% decline.

Bank of America's monthly Fund Manager Survey polls 230 panelists who manage roughly $620 billion worth of assets. The survey shows that money managers are cautious on the stock market and the macroeconomic environment. The major concerns are the U.S.-China trade standoff and Brexit.

According to the survey, fund manager cash allocations rose from 4.7% to 5%. That is an extremely high level of cash.

Meanwhile, over on Main Street, mom-and-pop investors aren't any keener. According to the American Association of Individual Investors ("AAII"), optimism recently fell to its lowest level in three and a half years. Pessimism was "unusually" high as well.

According to the Investment Company Institute – a global association of regulated funds – domestic equity mutual funds saw outflows of $11.16 billion for the week ending October 2. Global funds saw outflows of $2.6 billion... Meanwhile, domestic bond funds saw inflows of $5.2 billion.

Source: Daily Wealth

[winston]

The main reason for the stock market’s decline is NOT the coronavirus

By Mark Hulbert

The real driver is that investors had gotten too bullish

How big of a correction? Contrarians’ answer is that it depends on how traders react.

It would be a good sign if they rush to the sidelines and then quickly jump onto the bearish bandwagon.

In contrast, it would be a bad sign if they stubbornly hold onto their bullishness in the wake of the decline. In that case, contrarians would expect that an even deeper correction would be necessary to rebuild the Wall of Worry that would support a new leg upwards.

Source: Market Watch

https://www.marketwatch.com/story/the-m ... yptr=yahoo

[winston]

This Is Today's Most Important Stock Market Indicator

by Lawrence Fuller

Summary

The stock market is now trading on sentiment alone, because no one has a clue what the fundamentals are today.

Sentiment should hit its low point when the number of active virus cases in the US peaks and starts to decline.

This inflection point should coincide with the next significant bear market rally.

The recent rally is an opportunity to raise cash, employ hedges, and position defensively for a retest of the lows.

Source: Seeking Alpha

https://seekingalpha.com/article/433525 ... ent=link-7

[winston]

Is the Dow staging a genuine rebound? Here’s what experts think as the stock market attempts to shake the bearish grip of the coronavirus pandemic

By Mark DeCambre

[quote]
Some argue that the bottom has been put in, but others are worried that the market could retest its March lows.

Wolfe Research: “Our sense [is] that incoming economic data [and first-quarter] earnings season will be very disappointing”.

“We don’t believe that the global COVID-19 crisis is out of the woods just yet,” wrote the Wolfe Research team, with its analysts adding that they worry about infections remaining “very high” and the possibility of re-acceleration in places including Louisiana and New Jersey.

“We don’t believe that U.S. equity markets will find a sustainable bottom until the U.S. new infection rate definitively rolls over.”

David Kostin, chief equity strategist at Goldman Sachs, estimated that dividends will be down 25% and buybacks, one of the key supports for the market over the past decade, will be off 50%.

“From a sentiment angle, recent exceptional bounces suggest that investor sentiment is still in the denial phase, rather than in the phase of capitulation that paves the way for a new bull market,” wrote Peter van der Welle, multiasset strategist at Robeco.

Albert Edwards, Société Générale: “This optimism is the legacy of a long bull market. Investors can’t conceive that the Fed will ‘allow’ the stock market to collapse”
This optimism is the legacy of a long bull market. Investors can't conceive that the Fed will 'allow' the stockmarket to collapse. Think again. That was the view in 2007 too. Omnishambles rather than omnipotent.

Michael Wilson, Morgan Stanley: He believes the recent stock-market lows won’t be retested, even as he said he’s forecasting earnings to decline 20%.

Source: Market Watch

https://www.marketwatch.com/story/is-th ... yptr=yahoo

[winston]

Buy or sell? Why it’s so hard to know what to do

By Dana Anspach

Don’t worry so much about what everyone else is doing

On any given trading day on the New York Stock Exchange, two billion to six billion shares exchange hands. Who are all these people, why are they buying and selling, and how do they know what to do?

In many cases, the reasons are not what you think.

A pension plan may follow an asset allocation strategy for a portion of its investments, and at the end of the quarter, they need to rebalance. If stocks are down enough, they automatically buy more. Their buying reflects nothing about their current market sentiment and everything about the discipline they follow.

On that same day, a mutual fund may get redemption requests as people get scared and pull out of the market. Regardless of whether the fund manager thinks the market will be going up or down, the fund may be required to sell shares to raise cash.

Then you hear about a giant investment advisory firm and read their white papers. Hmmm. They follow a valuation approach based on their outlook over the next seven years. They are buying because price-to-earnings ratios of an asset class look low enough that the long-term potential for returns appears attractive.

Meanwhile, a hedge fund is selling positions to raise cash to pay down debt because it borrowed to invest.

Then there are the day traders, looking at charts and graphs and applying what is called technical analysis.

Then there’s that newsletter you read that focuses on macroeconomics. Unemployment will be skyrocketing. GDP will be down. People are saying it will be bad, really bad. Shouldn’t you be selling?

But wait, then you read that the stock market is a leading economic indicator. The market dropped substantially as it priced in the recession. Is it now looking forward, pricing in the recovery? Did you miss the bottom? Maybe it’s not too late. Perhaps you should be buying.

If you’re not sure whether you should buy or sell, maybe you are asking the wrong questions. What are you trying to achieve, over what time frame, and using what investment approach?

If you don’t know the answers, sitting on the sidelines is probably wise.

Source: Market Watch

https://www.marketwatch.com/story/buy-o ... yptr=yahoo

[winston]

This Is Essentially 'Sell Everything' Action Right Now

Traders should be celebrating this action as it will give us a fresh crop of opportunities.

By JAMES "REV SHARK" DEPORRE

The shift in market sentiment since Wednesday has been remarkably abrupt.

Breadth is running about six losers for each advancer and there is no notable safe haven.

There are a few 'stay at home' plays on the radar and gold is perking up again but this is essentially 'sell everything' action right now.

The bounce off the March lows was much bigger and lasted longer than many thought possible but it still was nothing more than a very energetic counter-trend bounce.

It was big enough and strong enough to convince many that there was a V-shaped bounce occurring, and when that was combined with $10 trillion in stimulus it was a good argument, but it still is not logical technical action.

At this point, there is no way to know how deep this pullback will go. All we know is that a second corrective wave of action is starting and it is going to take some time for it to play out. It is possible that the Fed or other fiscal measures could ride to the rescue but the charts currently suggest that this pressure could last longer than just a couple days.

Source: Real Money

https://realmoney.thestreet.com/investi ... yptr=yahoo

[winston]

History Says The Market Could Climb Another 18% From Here

by Mark Putrino

Right now, there are more bears in the market than usual. It’s no surprise, given what has happened so far this year. But the massive negativity is actually a positive sign for the market.

One way to see it is from the American Association of Individual Investors (“AAII”), which surveys thousands of investors each week.

/According to AAII, more than 50% of investors are bearish today. And bearish sentiment recently hit a high of 53%. This might not sound extreme, but it’s only the third time in history we’ve seen a level that high.

We’re seeing historic levels of bearishness today. And history says it could be setting up an 18% gain over the next year. The smart bet is to stay long.

Source: DailyWealth.com

https://dailytradealert.com/2020/05/18/ ... -from-here

[winston]

Sentiment Speaks: The Next Pullback May Be Your Last Chance

by Avi Gilburt

Summary

The market is setting up for a major rally in 2021.

The next week or two will tell us if that rally into 2021 has begun in earnest.

The next pullback is likely your last chance to position for that rally.

Source: Seeking Alpha

https://seekingalpha.com/article/438649 ... ent=link-7

[winston]

BofA says market is so bullish it’s time to sell on vaccine news

by Ksenia Galouchko

The monthly survey, conducted Nov 6 through Nov 12 saw investor optimism about stocks skyrocket, with allocation jumping to the highest level since January 2018.

Cash holdings plunged to the lowest level since April 2015, while economic growth expectations surged to a 20-year high.

Investors snapped up more volatile assets, such as small-caps, value, banks and emerging-market stocks, while shifting away from bonds and staples.

Allocations to equities in November rose to net 46% overweight, close to “extreme bullish,” according to BofA.

Hedge funds also maintained a high exposure to stocks, at 41%.

Among surveyed investors, 91% expect the economy to be stronger in the next 12 months, and 66% believe that global growth is in an early-cycle phase as opposed to a recession.

Fund managers surveyed by BofA now expect a credible virus vaccine to be announced by mid-January 2021, compared to last month’s bets on mid-February.

Source: Bloomberg

https://www.theedgemarkets.com/article/ ... ccine-news