Posts filed under “Sentiment”

Wall Street (Still) Lukewarm on Equities

Click to enlarge
Chart

 

 

Merrill Lynch continues to point out that the Street remains unenthusiastic about stocks:

Sentiment ticks up to highest in 13mos, but still far from bullish
The Sell Side Indicator — our measure of Wall Street’s bullishness on stocks — ticked up just slightly in June to 49.8 from 49.6. The indicator has improved in eight of the last eleven months after hitting an all-time low of 43.9 last July, and is now at its highest level since May 2012, when it first flashed a “Buy” signal. The indicator still remains firmly in “Buy” territory, however, as Wall Street’s bearishness on equities remains at extreme levels relative to history. Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism and the fact that strategists are recommending that investors significantly underweight equities at 49.8% vs. a traditional long-term average benchmark weighting of 60-65%. Even though the S&P 500 climbed 20% from when sentiment bottomed to its all-time-high in May, history suggests that strong equity returns can last for years after the indicator troughs.

Indicator’s expected 12-month total return is +24%
With the S&P 500’s indicated dividend yield above 2%, that implies a 12-month price return of 22% and a 12-month value of 1955. Although this is not our S&P 500 target, this model is an input into our target, which incorporates valuation, sentiment and technicals. Historically, when our indicator has been below 50, total returns over the subsequent 12 months have been positive 100% of the time, with median 12-month returns of +30%. Past performance is not an indication of future results.

A reliable contrarian indicator
The Sell Side Indicator is based on the average recommended equity allocation of Wall Street strategists as of the last business day of each month. We have found that Wall Street’s consensus equity allocation has historically been a reliable contrary indicator. In other words, it has historically been a bullish signal when Wall Street was extremely bearish, and vice versa. See our December report for more details on the Sell Side Indicator.

Very interesting stuff . . .

 

 

Source:
Sell Side Indicator: Wall Street Still Lukewarm on Equities
Savita Subramanian
Merrill Lynch Research, 01 July 2013

Category: Sentiment, Technical Analysis

Question: What Is Driving Hindenburg Omen Internals?

Source: Stockcharts     Definition: Hindenburg Omen is triggered when: (1) more than 2.2% of stocks on the NYSE are at 52-week highs AND more than 2.2% are at 52-week lows, (2) the 50-day moving average is trending higher, (3) the McClellan Oscillator is negative, and (4) new 52-week highs don’t exceed new lows by…Read More

Category: Markets, Sentiment, Technical Analysis

What Do You Control?

During this past month, we have seen significant moves up and down. Volatility has risen; there have been some scary drops in Asia, and some follow through selling (more or less) in the US. We have seen small measures of over-reaction, along the lines of “What do I do? What should I do? Should I…Read More

Category: Investing, Sentiment, Trading

Don’t Be This Trader

Via Trader Habits, here’s another graphic to add to our massive collection of Sentiment Cycles (here, here and here):   Don’t Be This Trader  

Category: Sentiment

Random Thoughts: Comebacks, Intraday Reversals and the like

Since it is a Friday before a 3 day holiday weekend, it is a good time to kick back and think about what the recent market action might (or might not) mean. • Most Day-to-day market action is noise, There is very little signal involved, with the vast majority of commentary simply after-the-fact rationalizations of…Read More

Category: Investing, Markets, Psychology, Rules, Sentiment, Technical Analysis

Percentage of SPX Stocks Over 200 Day Moving Average

Renaissance Macro Research, May 14, 2013   Jeff deGraaf, technician extraordinaire (formerly of Lehman now at Renaissance Macro Research) makes an interesting observation about the heavily overbought markets. Last week, the S&P500 had ~93% of all stocks trading over their 200 day moving average. Normally, this degree of overbought should lead to a correction. As…Read More

Category: Markets, Sentiment, Technical Analysis

Habits of the Bear, Bull Markets and Agency Issues

  “If you’re bullish and wrong, you usually have plenty of company. But if you’re bearish and wrong, it’s almost unforgivable.” -Bob Kargenian, TABR Capital Management, Barron’s DECEMBER 15, 2012     The above quote from Barron’s has been on my mind for a while. I thought of it again as the markets have made…Read More

Category: Investing, Psychology, Sentiment, Valuation

Exuberance? Euphoria? Hardly . . .

Yesterday, the DJIA closed at a new record high, at 15,056.20 while the S&P500 closed at 1,625.96. While I keep hearing some people claim there is an excess of giddiness, please excuse me for failing to see it. My frame of reference is the 1999-2000 top, and I certainly do not see anything remotely resembling…Read More

Category: Markets, Sentiment

Flows say: Still No Confidence in Equities

Cyclicals vs. Defensives
Cyclicals vs. defensives

 

There are many different ways to measure investor confidence and market sentiment.BoA Merrill Lynch looks at their client flows relative to the market. Some of this is instructive:

On the one hand, private clients were net sellers in four of the last five weeks. However, as the chart shows above, there is a possible rotation starting away from Defensives and towards Cyclicals. That move might suggest that sentiment is improving.

One caveat: It is easy to cherry pick what you want when it comes to investor sentiment. This has a bullish color to it, but there are lots of other bearish readings as well.

 

 

Read More

Category: Investing, Markets, Sentiment

Interview: Ned Davis, NDR

  “We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” -Ned Davis   If you are a regular main street investor, you may never heard of Ned Davis. If you are a market technician,…Read More

Category: Philosophy, Psychology, Sentiment, Technical Analysis