Wednesday, June 18, 2008

Kill my Fun

It is very hard to be a bear on a day, despite a 131-Dow-Point drop and solidly bearish indicators, when you read this stuff:
  • Fund managers took the most negative stance on equities for a decade in June amid worries about the potential impact of stagflation, Merrill Lynch's monthly fund manager survey showed.
  • Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve
  • U.K. bank's (Royal Bank of Scotland) strategist warns of stock market crash
This on top of last week's AAII survey of investors at 54% (or so) bearish vs. norm in the 20's.

It is very rare that sentiment this terrified results in a negative market. I remember back in July 2006 when the market appeared to be tumbling hard that sentiment was too bearish. The result was a huge multi-month rally. It was pretty bearish in January of this year, too.

Sentiment is a very tricky game. But is the market already too fearful?

I'm just sayin'


Anonymous said...

Even CNBC tones down over the last few days!

Take a look:

I hate to say it, I'm a BEAR! Keep posting my friend! Oh, the VIX just started to climb which brings me even more confusion!!! :(

Kind Regards,
A loyal reader :)

Anonymous said...

If so, where is the volume that tells the panic spike?
This time market looks to go lower until pessimists are walking the talk.

Anonymous said...

And please watch NDX.
It has betrayed INDU and SPX by parading a strength.
However all good things come to an end.
I see a signal in NDX, that it is ready to take a dump and play catch up with other indices.
I have been paying so much attention in so called "sentiment", and "contrarian indicators".
And it has become rather obvious that "Walk" and "Talk" moves in different dimensions.
It looks like only when one catches up with the other, we see volume and direction that confirmes these indicators.

Two Crystal Balls.

Anonymous said...

Yes, there are "talking bears" & there are "selling bears".

And the bears that i love the best are those that are intermediate term bears who are looking for a short-term bounce. They missed the (selling) train; are left standing on the train platform; and are hoping that the train backs up to let them on (conveniently).

Michael Kahn said...

good points everyone. Walking the walk and talking the talk are different and I have written about that in my column and newsletter in the past.

Panic spikes sort of ring the bell at the bottom. I am looking more for a reason to rally and catch everyone off guard. Then the pendulum swings too far the other way as pundits give us "see, I told you the crisis was past." Then we go down hard.

But as I said before, sentiment analysis is a tough game. Fearful can become more fearful. Oversold can become more oversold.

Anonymous said...

No fear!!! Be bullish.

Anonymous said...

Hey, any ideas on the Chinese A-shares? Everybody in China are now asking for help! Fearful there....

Michael Kahn said...

China? Parabolic up. Parabolic down. And usually all the way to the start of the Parabola (summer 2006 levels?)

I don't feel sorry for China and consider that country to be our biggest threat. We're stupid enough to import the cheapest products and that is exactly what we get but sending us poisoned toys and pet food ? A pox on them (the urban capitalists, that is, not the victims of the earthquakes).

Anonymous said...

Frankly speaking, nobody loves Chinese! But, they're everythere!!! Sigh!

Anonymous said...

Let thy words prophesy.
Congratulation QTP.
It is playing out as you said, in seguence. Rally wasn't much of a rally yesterday, but it looks like caught everyone off guard and the market is heading lower rather fast.


Anonymous said...

I've found sentiment an accurate statistic when looking historically at the market over long time-lines, but totally useless for short term timing. I would love to hear of any reader who was able to use sentiment differently.