Is Sentiment Getting Problematic?
Strategists are still bullish and cite sentiment as cause for concern. But are they missing several other issues?
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I can begin with sentiment because those ridiculous day traders at the American Association of Individual Investors changed their minds in a hurry. The bulls jumped eleven points to 48.3% while the bears fell eight points to 30.7%.
That must be why all of a sudden I heard so many strategists decide to cite ‘sentiment’ as being problematic for the market. Oh don’t fret, they are still bullish, but they are, well, shall we say, concerned.
They have not cited the incredible speculation in crypto. They have not cited the fact that Roaring Kitty decided to enter the fray again. They have not cited the fact that breadth has been sour every day this week. Oh wait, it was green one day and that was +50. That’s it.
The McClellan Summation Index even stopped going up. I suppose with the Employment number coming on Friday, that can get saved, but I can tell you it is not what you want to see when the indexes are at new highs.
Something else you don’t want to see when the indexes are at new highs is an increase in the stocks making new lows. Nasdaq had 140 on Thursday.
But aside from all of that, the Transports have been down six of the last seven days and I haven’t even seen a mention of it. Not only have they given back the entire post election rally, they are now down four percent in just over a week and I haven’t seen a soul even mention it.
I grant you they are getting oversold and have some support down here but why doesn’t anyone care? Is it just complacency?
Someone asked me about RSP, the equal weight S&P. You see it has been down in the last week as well, although not that much. I would tell you it’s not great that it hasn’t kept up but if we step back we would acknowledge that the uptrend line from August is fully intact. Every pullback to the line has seen a bounce.
My view on the market has been we should see a pullback next week and then rally again in late December. In RSP’s case, the pullback has already begun. But if it gets down to that line in the next week or so, it really ought to bounce, shouldn’t it?
The problem comes when/if the bounce fails or the bounce produces a lower high. That would change the pattern and therefore be problematic.
I would end by noting that on Monday I highlighted VGK, an etf to be long European stocks. Everyone hated (still hates?) Europe and it seemed to me it was holding in the face of bad news. The news has gotten worse this week and the market has continued to rally.
Here too there has been little chatter. I guess everyone is too focused on Bitcoin.
