Posts filed under “Contrary Indicators”

Market Corrections of 4% or More


Whenever we have a very red or green day, I like to find the most persuasive piece I can arguing for the contrary position. Today, that would be something bullish.

What is rather surprising is that I found just such an upbeat contrary take in the usually skeptical Alan Abelson’s column. Abelson notes that while this has never been a rip-roaring recovery, it is slowing perceptibly. He adds, however, that “doesn’t imply a return to the dark days of the late, unlamented Great Recession.” There is a huge difference between a soft patch and a full blown double dip.

To demonstrate such, he relies on InvestTech Research‘s Jim Stack, who notes that investors are more prone to overreact to each bit of news:

“Every bull move worthy of the designation suffers the occasional pause for breath. During the great bull market of the ’90s there were 24 corrections of more than 4%, and during the big market move upward from October 2002 to October 2007, there were nine. With the hangover from the worst recession since the 1930s accompanied as it was by a cataclysmic crash in stock values, it’s scarcely surprising that equities are more prone to the jitters than their more recent predecessors, and that this spirited cyclical rally, which is a mere three years old, already has suffered 11 spasmodic episodes . . .

We might add that investors have also grown more easily spooked for the very good reason that the world is far more dicey, and its woes more encompassing, than even as recently as five years ago. And investing, like so much else in the realm of finance, has become increasingly a short-term affair. This quickening means that now, more than ever, it pays to remember that no one ever went broke taking a profit . . .What also makes us skeptical of those headlines of the horrors about to be visited on the markets are the sentiment figures for both amateur and so-called pros. On that score, in the latest tally of members of the American Association of Individual Investors, 33.8% were bearish, 31.2% bullish and 35% squirmed uneasily on the fence.

Similarly, among the advisory services polled by Investors Intelligence, the bulls came in at 44.1%, down from 48.4% and 52.7% the previous two weeks. Bears, meanwhile, edged up to 23.7% from 21.5% the preceding two weeks. These readings aren’t by any means extreme, but the trend tells a contrarian that the increasingly dubious equity strategists have got it wrong.

So what else is new?”

Its worth noting that eventually all markets roll over, but so far its been a losing game guessing where the top ultimately is. Better to let the market let you know when its rolling over for real.



The Scare Mongers
Barrons, April 21, 2012

Category: Contrary Indicators, Markets, Psychology

Skyscraper Index

Back in February, we looked at the Skyscraper Index Building Bubble. This is the money shot from that report:   >   Note I posted a small low res shot so as to not overload the servers; if you want to see the full report, click here — otherwise, to see the larger version of…Read More

Category: Contrary Indicators, Digital Media, Psychology, Valuation

Uh-Oh: Economist Cover “Can it be…the recovery?”

We have many rules of thumb for Contrary Indicators. When it comes to magazine covers, we look for a mainstream (not business) outlet joining a trend in progress as it reaches a cathartic moment. Media jumping on a bandwagon can augur a top or bottom just as a major trend reaches a climax. Yesterday, we…Read More

Category: Contrary Indicators, Economy

Barron’s: Home Prices Are About to Bottom (take 2)

If this week’s cover story in Barron’s cover article on a housing bottom looks vaguely familiar, its because it is familiar. Almost 4 years ago, the magazine published pretty much the same article saying mostly the same things. In the July 14, 2008 edition, Jonathan R. Laing wrote “Bottom’s Up: This Real-Estate Rout May Be…Read More

Category: Contrary Indicators, Psychology, Real Estate

Magazine Cover Indicator: New York “End of Wall Street”

This week’s New York magazine — a non Business publication — has a rather bearish cover discussing “The Emasculation of Wall Street. Last week, I mentioned the Barron’s cover was somewhat bullish, with the caveat that Barron’s is a business weekly. New York magazine is more general interest — its not Time or Newsweek, because…Read More

Category: Contrary Indicators, Investing, Psychology

NYT Sunday Business: Magazine Cover Indicator?

Uh-oh: “I Just Got Here, but I Know Trouble When I See It” > That headline and image is the cover page of the Sunday NYT Business section. It may be the closest thing I have seen to an excessively negative magazine cover indicator in a while. In general, I am negative about the economy…Read More

Category: Contrary Indicators, Psychology

Financials = Value Trap

I don’t often find myself in agreement with bulge firm research, but this is in line with my beliefs: “This year, inexpensive stocks have simply grown cheaper, with the most notable example of this being Financials. Three of nine industries that make it into our value trap model this month are in the Financials sector,…Read More

Category: Contrary Indicators, Valuation

Blog Traffic Goes (Short Term) Bullish in August

I am not particularly bullish these days — 50/50 stocks versus cash/bonds — and while we certainly could see a bounce up towards the 1250 level on the SPX, I am not sanguine about the next 2Qs of market performance. That said, the chart below may be a very short term, bullish indicator. As we…Read More

Category: Contrary Indicators, Psychology, Weblogs

What Do High Levels of Job Anxiety Signify?

> A recent Gallup poll found 31% of US workers are “worried they could soon be laid off.” That number is “similar to the 31% seen in August 2009 but double the level recorded in August 2008 and for several years prior.” This could have several interpretive meanings for the markets and economy: • Negative…Read More

Category: Contrary Indicators, Data Analysis, Employment, Psychology

Diverging ETFs: What Are GLD & SPY Telling Us ?

GLD vs. SPY Relative Price click for larger graphic Source: Solari Report, Yahoo Finance > Here is an interesting observation: The value of the SPDR Gold Trust (GLD) is now worth more than the SPDR S&P 500 (SPY) representing the full index. (This refers to the ETFs and not the underlying value of the SPX…Read More

Category: Contrary Indicators, ETFs, Gold & Precious Metals, Psychology, Trading, Valuation