Market Sentiment 05 (Nov 17 - Dec 25)

[winston]

The Lack of Bulls Is Really Bullish

Did you know that huge drops in bullish sentiment among investors is a strong contrarian buy indicator?

According to an American Association of Individual Investors survey, the amount of bullish stock investors dropped to 15.8% last week.

That reading dropping below 20% is a rare occurrence. Its only happened 31 times since 1988. And nearly every time its dropped this low, stocks rallied big over the next three, six and 12 months.

Of those 31 drops, 29 were followed by a stock market rally over the next three months. And 30 were followed by a rally over the next six and 12 months. The average three-month gain was 7%. The average six-month gain was 13%, and the 12-month average was 20%.

A graph depicting the percent change in the Nasdaq following a yield curve inversion

History shows that stocks have a 97% chance of rising about 20% from current levels over the next year.

Source: Investor Place

[winston]

Where mom ‘n pop traders think the market will be six months from now

Coming into yesterday, retail traders weren’t feeling particularly bullish either.

We can see this by monitoring research from the American Association of Individual Investors (AAII).

From its reading (4/27), only 16.4% of AAII members felt bullish about where the market will be in six months. A whopping 59.4% were bearish, with the remainder neutral.

For some context, this was the most bearish that investors have been in the last 12 months. It’s also double the average level of bearishness, which comes in at 30.5%.

Source: Investor Place

[winston]

Retail Investors Are Giving Up

by Sean Michael Cummings

Across the market, retail stock traders are 39% less active than they were at their peak in January 2021. And bullish call-option trades from retail investors have hit their lowest levels since April 2020.

We’re not there yet. But investors are starting to hate stocks. And that means we’re getting closer and closer each day.

Source: Daily Wealth

https://dailytradealert.com/2022/05/24/ ... giving-up/

[behappyalways]

Investors Are Terrified, So Why Aren't They Selling
https://www.zerohedge.com/markets/inves ... ey-selling

[winston]

Investor Bullishness Just Hit a Decade Low

by Brett Eversole

Retail investors are the most pessimistic they’ve been in a decade.

We’ve only seen more extreme readings than this during five other market environments. Those included the global financial crisis, the post-tech-bubble bottom, and the early-1990s recession.

That doesn’t mean the bottom is in. However, history shows it’s likely getting close.

Source: DailyWealth.com

https://dailytradealert.com/2022/06/22/ ... ecade-low/

[winston]

Fear Has Gone Missing in Wall Street’s Slow-Motion Bear Market

by Thyagaraju Adinarayan and Denitsa Tsekova

The CBOE Volatility Index, the so-called fear gauge of stock-investors’ sentiment, is holding well below levels seen in past bear markets.

The S&P 500 has been staging a long, orderly descent from the record level hit at the start of the year as the Federal Reserve pulls back its flood of pandemic-era stimulus. That differs from shock-driven crashes like the ones caused by Covid-19 in March 2020 or the collapse of Lehman Brothers Holdings Inc. in September 2008.

As deep as it has been, with the S&P 500 down 18% this year, the causes are well-known: tighter monetary policy and surging inflation.

Source: Bloomberg

https://finance.yahoo.com/news/fear-gon ... 32285.html

[winston]

Chaos is becoming the rational base case in market ruled by fear

The index has swung more than 5 per cent in 4 of the last 8 weeks, ending almost precisely where it began.

After uniformly failing to predict this year’s bear market, the process of rolling back optimistic predictions has been slow and messy - befitting a market that while falling as much as 24 per cent has staged 4 separate bounces of 5 per cent or more.

“If the economy avoids a recession, then history suggests the bear is close to over”.

“If the economy falls into a recession, then there is significant downside risk in both time and price.”

"The lack of clarity about the path of the economy, rate hikes and quantitative tightening certainly contribute to the variance in forecasts”.

Source: Bloomberg

https://www.businesstimes.com.sg/govern ... ed-by-fear

[winston]

BofA Survey Shows Full Investor Capitulation Amid Pessimism

by Sagarika Jaisinghani and Michael Msika

Investors slashed their exposure to risk assets to levels not seen even during the global financial crisis in a sign of full capitulation amid a “dire” economic outlook.

Global growth and profit expectations sank to an all-time low, while recession expectations were at their highest since the pandemic-fueled slowdown in May 2020.

A net 58% of fund managers said they’re taking lower than normal risks, a record that surpassed the survey’s global financial crisis levels.

The most investors since the global financial crisis are betting that inflation will be lower in the next year, which means lower interest rates.

Investors are very long cash and defensives like staples, utilities, health care, and very short stocks, particularly EU, banks, tech and consumer, while they have also cut exposure to resources

Most crowded trades are long US dollar, long oil and commodities, long ESG assets, long cash and short US Treasuries

Among equity regions, investors are most bearish on Eurozone and Japan

Investors are most bullish cash and most bearish on equities

In past 4 weeks, investors increased their exposure to bonds, staples, utilities, healthcare, while slashing exposure to equities, Eurozone, materials and banks

Source: Bloomberg

https://finance.yahoo.com/news/bofa-sur ... 16443.html

[winston]

Mom ‘n Pop investors are terrified right now

$89 billion that just flowed into money market funds last week.

In fact, the American Association of Individual Investors weekly survey found that for two weeks in a row, the percentage of bearish investors in America has outnumbered the percentage of bullish investors by more than 40%.

That’s an unusually high number which marks “peak fear”.

Indeed, the net bull ratio has been this low only once before: In early March 2009, the exact same week stocks bottomed after the Great Financial Crisis!

Source: Investor Place

[winston]

The American Association of Individual Investors ("AAII") Investor Sentiment Survey

This weekly poll asks a group of individual investors how they feel about the market.

Specifically, it asks if they're bullish, bearish, or neutral on stocks over the next six months.

And late last month, an astounding 61% of these folks were bearish.

Again, that's the highest bearish reading since the 2009 bottom.

Source: Stansberry Research