Posts filed under “Sentiment”

Disbelief in Equities is What is Driving Them Higher

As a fan of investor psychology, I find sentiment intriguing. Measuring it is a challenge. We can’t trust what people say because they become bullish after they buy and bearish after they sell, convincing themselves that past trades were the correct way to go. Humans are notorious liars — especially to themselves. When they are not lying, they often can be found busy making excuses and other rationalizations for their actions.

Hence, we need to find more objective ways to view and measure sentiment.

That is why I find Jason Goepfert’s SentimentTrader website so intriguing. He follows an extraordinary number of indicators that track investor sentiment.

One of his recent comments has been making the rounds on social media. Paraphrased to remove the trader jargon and hyperbole, it read something like this:

The SPX has traded more than half a percent above its five-day moving average for 10 consecutive trading days in a row. In the prior 75 years, this has only happened twice — in 1982 and 2002. Each time it marked an end of a multiyear bear market. In other words, this is a rare rip higher that has only occurred previously at the end of multiyear bear markets. Each time it happened came after a mild, four-week drop. It’s incredibly uncommon and wholly unexpected.

The market condition that Goepfert is describing can best be called “persistently overbought.” As we have noted before, persistently overbought stock markets reflect strength and demand for equities, often in a period of deep pessimism. That’s seems like a pretty good description of current conditions.

I contacted Goepfert to see if he could provide more insight into what this unusual sentiment reading means. After all, sentiment measures are notoriously fickle, and tend to generate more noise than signal — the exception being when they reach extremes.

Which was exactly his point. On Oct. 15, SentimentTrader’s metrics reached just such an extreme. Out of 85 measures he tracks, 43 reached unusually high levels of pessimism all at once. That many metrics pinning the needle at the same time has only happened at other intermediate-term lows, according to Goepfert.

Continues here



Category: Investing, Psychology, Sentiment

Playboy Bunnies, Mila Kunis and the Myth of the Celebrity Stockpicker

Last week, I came across the following headline: “As music sales fall, sax player Kenny G turns to stockpicking.” My immediate reaction: Uh oh. The last thing any bull market needs is for celebrities to be featured in the financial press. As soon as that starts, it means the bull market must be near a…Read More

Category: Contrary Indicators, Investing, Really, really bad calls, Sentiment

Too Bullish or Too Bearish?

One of my favorite pastimes is dissecting accepted Wall Street wisdom to see if it contains any value for investors or traders. Often, upon examination, the widely held beliefs turn out to be closer to magical thinking than financial acumen. One of the more recent examples is the way some analysts use data on sentiment…Read More

Category: Markets, Sentiment, Trading

1958: Public Investing in the Stock Market as Never Before

This week in 1958: LIFE Magazine highlights a strange new phenomenon: The public is investing in the stock market as never before. “On the average,” reports LIFE, “500,000 new customers a year have been getting into the market and 8.6 million Americans now own some kind of common or preferred stock…. To an extent which…Read More

Category: Investing, Markets, Sentiment

Household Rotation from Fixed Income to Equities

  Today’s chart comes to us from Torsten Slok, the chief international economist at Deutsche Bank AG. While rumors of an institutional rotation — selling equities and buying fixed income — swirl, we see the opposite behavior from households. Continues here    

Category: Investing, Sentiment

About David Tice’s 60% Crash Call . . .

Earlier this week, Prudent Bear fund founder David Tice warned of an imminent crash — as bad as 30-60% down on the S&P500. One small thing: This is pretty much the same call that Tice made in 2010 and 2012. Apparently, if you make the same crash call every 2 years, most of the media…Read More

Category: Markets, Really, really bad calls, Sentiment, Short Selling

In Stock Market, Anxiety Can Be Good Thing

Source: WSJ

Category: Digital Media, Investing, Sentiment

Mauldin: Bubbles, Bubbles Everywhere

Bubbles, Bubbles Everywhere By John Mauldin August 15, 2014     Easy Money Will Lead to Bubbles Excess Liquidity Creating Bubbles Humans Never Learn Anatomy of Bubbles and Crashes A Few Good Central Bankers Jack Rivkin at His Best Dallas, San Antonio, and Washington DC     The difference between genius and stupidity is that…Read More

Category: Books, Sentiment, Think Tank

Wall St Bullishness vs Equities Complacency

Funny to wake up after yesterday’s selloff to see two such diametrically opposed views from major investment houses:    

Category: Analysts, Sentiment

Edginess or Extrapolating The Unextrapolatable

Edginess. No, I am not referring to the one sought by my daughter by rolling her own and pushing boundaries (fortunately, for a parent, eschewing the tats, for now at least), but as in uneasiness, anxiety, disquietude, restiveness, worry, and an increasing sense of agitation of the type that George Soros wrote about in his…Read More

Category: Sentiment, Think Tank