• 526 days Will The ECB Continue To Hike Rates?
  • 526 days Forbes: Aramco Remains Largest Company In The Middle East
  • 528 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 927 days Could Crypto Overtake Traditional Investment?
  • 932 days Americans Still Quitting Jobs At Record Pace
  • 934 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 937 days Is The Dollar Too Strong?
  • 937 days Big Tech Disappoints Investors on Earnings Calls
  • 938 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 940 days China Is Quietly Trying To Distance Itself From Russia
  • 940 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 944 days Crypto Investors Won Big In 2021
  • 944 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 945 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 948 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 948 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 951 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 952 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 952 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 954 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Investor Sentiment: Bearish, Bullish or Something In- Between?

Over the past week, I have read several accounts why the market must go up or down, and the authors of these articles typically sight investor sentiment. Either investors are too bearish and this is a bull signal or they are too bullish, which is a bear signal. It is conflicting data, but that is what makesa market.

But the degree of investor sentiment -whether you fall in the bullish or bearish camp -really isn't the problem here, and for the record, our data shows investors to be more bullish than bearish. The problem really has to do with the state of investor sentiment following the 10% drop in the SP500 over the 8 week period from April to June, 2012. Following this period, investors turned bearish but it wasn't to any extreme degree. Furthermore, there was no consensus among the various measures of sentiment that we utilize. For example, the "dumb money" was bearish (i.e., bull signal) while corporate insiders (i.e., the "smart money") were neutral. The Rydex investor, which measures real asset flows, remained bullish. In essence, the sell off did not produce the kinds of extremes in bearish sentiment that we would expect to see at a lasting and durable bottom. Furthermore, the lack of extremes almost guaranteed that the subsequent rally was going to be weak as the "rubber band" was not pulled back tightly at the market bottom. The snap back rally was likely to fail.

Investors have become primed to front run anything that sounds like quantitative easing or bail out. Thus, you can understand why investors weren't really too concerned following the quarter 2 drop in the SP500. Some central banker had their back. It doesn't matter whether investors are bullish or bearish now - although we believe they are still too optimistic -- what matters is the market never really cleared itself of the weak hands during the initial down draft back in April and May. And a market that doesn't cleanse itself periodically is a market built on a weak foundation. As I have been stating for over three months now, this is a market top until proven otherwise

 

Back to homepage

Leave a comment

Leave a comment