Saturday, May 26, 10:30 a.m.
I’m seeing a lot of commentary claiming that investor sentiment has become extremely bearish and is at levels usually seen at correction and market bottoms.
I’m not seeing that in my favored measurements of sentiment.
The poll of its members by the American Association of Individual Investors this week showed 30.5% bullish, and 38.7% bearish. In our work we consider the AAII poll to be in the warning zone to watch our other indicators for an upside reversal when bearishness rises above 50%, and bullishness drops below 20%.
The Consensus Sentiment Index (Consensus Inc.) which measures the sentiment of brokerage firms and professional advisers, is at 55% bullish, down from 61% three weeks ago. Consensus Inc. identifies a level of 25% bullish as the approximate oversold level for potential trend reversals. Heading in the direction usually seen during market corrections, but not near levels usually associated with market lows.
And then there is the VIX Index (aka the Fear Index), which measures the optimism/fear level of options traders.
As shown in the chart (the vertical red lines), by the time fear has reached an extreme low level a rally has usually run its course and a top is close. The VIX then begins to rise as the next correction gets underway as traders increasingly lose their confidence and bullishness.
As the current correction has been underway the VIX has been rising, but it has more to go before it would reach the minimum level of fear usually seen at correction lows, which is the dotted blue line. And as the chart shows, in more serious corrections fear can rise much higher than the dotted line.
So based on investor sentiment anyway, it would appear the correction has further to go.
But we will certainly be watching the technical indicators that give us our buy and sell signals closely, as our next signal will obviously be a buy signal.
To read my weekend newspaper column click here: Stop the Noise – Americans Aren’t Dumb! May 25, 2012
Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, there is an in-depth ‘Global Markets’ report from Thursday, and an in-depth ‘U.S. Markets’ update from Wednesday in the subscribers’ area of the Street Smart Report website. But please stay tuned to the hotline in the meantime for more potential portfolio changes!
Yesterday in the U.S. Market.
It was a fractionally negative day, but not enough to spoil the positive week. Volume was very light with only 0.6 billion shares traded on the NYSE.
The Dow closed down 74 points, or 0.6%. The S&P 500 closed down 0.2%. The NYSE Composite closed down 0.2%. The Nasdaq closed down 0.1%. The Nasdaq 100 closed down 0.2%. The Russell 2000 closed down less than 0.1%. The DJ Transportation Avg. closed down 0.6%. The DJ Utilities Avg closed up 0.1%.
Gold closed up $ 14 an ounce at $ 1,572, but down $ 19 for the week.
Oil closed up $ .16 a barrel to $ 90.82 a barrel.
The U.S. dollar etf UUP closed up 0.1%.
The U.S. Treasury bond etf TLT closed up 0.4%.
Yesterday in European Markets.
European markets closed up fractionally. The London FTSE closed up 0.1%. The German DAX closed up 0.4%. And France’s CAC closed up 0.3%.
Global markets for the week.
A mixed week globally after three very ugly weeks.
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Premium Content Area.
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To obtain access please click on the ‘Subscribe’ link. It will take you to an information page on subscribing to Street Smart Report, a subscription to which includes access to the premium content area of this Street Smart Post blog.
In the Premium Content section this morning: U.S. stock market short-term and intermediate-term signals. Gold. Bonds.
Next week’s Economic Reports:
Next week, a holiday-shortened week, will be a very heavy week for potential market-moving economic reports, which include the ADP Monthly Jobs Report, Chicago PMI, the next Revision to 1st Quarter GDP, the ISM Mfg Index, and The Big One!, the Labor Department’s monthly jobs report for May. To see the full list and times for each release click here, and look at the left side of the page it takes you to.
To read my weekend newspaper column click here: Stop the Noise – Americans Aren’t Dumb! May 25, 2012
This blog appears every Tuesday, Thursday, and Saturday morning and at occasional times in between! Follow it via the RSS feed or follow it in Twitter (the handle is @streetsmartpost) so you won’t miss any posts.
Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, there is an in-depth ‘Global Markets’ report from Thursday, and an in-depth ‘U.S. Markets’ update from Wednesday in the subscribers’ area of the Street Smart Report website. But please stay tuned to the hotline in the meantime for more potential portfolio changes!
I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m.
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