Wednesday, December 30, 2009
SENTIMENT NUMBERS
The bears moved deeper into hibernation this week with their lowest reading since 3-Apr-87, more than 22 years ago. That year saw five more months of gains, with the DJ Industrials moving from 2,335 in April to a high of 2,709 in late August. That action preceded the crash that October. These fleeing bears did not move into the bullish camp, as their number declined too. Instead there were more editors moving to the correction camp. There are lots of skeptical bulls out there and that is better than a lot of roaring bulls.
The bulls were down to 51.1% from 52.2% the last two weeks. That was their highest since December 2007, when their number was retreating from 62.0% shown at that Octobers all-time market high. A year later at the first bear market lows the bulls had slipped to just 22.2%.
The bears were down to 15.6% from 16.7%. Their April 1987 reading was 14.5%. At the market highs in October 2007 the bears were 19.6%. A year later, the bears reached a fourteen year high at 54.4% when few editors were positive for equities.
Advisors classified as correction were up to 33.3% from 31.1%. This group is mostly bullish but they expect an intervening market retreat before the rally begins. They look to buy on dips. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa. The 35.1% reading from three weeks ago was the highest since the 35.3% from 3/13/92
The averages are now on a six-session winning streak, though daily volume is well-below average and few stocks are showing daily P&F chart changes. In addition, we see fewer than half of our forty-six sector indicators with an upward direction and positive chart formations. Those negative divergences are worrying some of the advisors causing the shifts to the correction camp. Markets do climb a wall of worry and editors looking for corrections are worried bulls".
The difference between the bulls and bears was 35.5%, unchanged from last week and bearish. The spread was 40% in Oct-07.
The 10-week average of the "bulls over the bears" [eliminating the correction] hit 72.0%. That is its highest since July 2007.
Wednesday, December 23, 2009
SENTIMENT NUMBERS
Overview
The holiday season is almost upon us and some newsletter editors use these two weeks to take a break from their publishing schedules. In addition, last week's trading again showed the primary broad indexes moving up to test overhead resistance and pullback, as they have done repeatedly over the past two months so other advisors felt there was no reason to change their opinions. Those factors resulted in a week with unchanged readings for all three sentiment categories, a somewhat rare but not unprecedented result.
Markets began this week with solid gains and we finally saw breakouts to new highs for the NASDAQ Composite and S&P 500. Technology shares are showing leadership in this latest move higher, the DJ industrials are lagging behind and still trade below 10,500. Our recent comments have noted a high level for the correction camp [short-term bears] and looked for upside index breakouts to shift some of their number into the bulls. That move may now occur and we could shortly see excess optimism around 60% that occurs around the time of a major top.
The bulls remained at 52.2%. That is their high since December 2007, when their number was retreating from 62.0% shown at that October's all-time market high. A year later at the first bear market lows the bulls had slipped to just 22.2%.
The bears were again at 16.7%. That is just above early December's 16.5% level. That was the fewest bears counted since June 2003, shortly after stocks rocketed up from the previous bear market lows in 2002 and early 2003. At the market highs in October 2007 the bears were 19.6%. A year later, the bears reached a fourteen year high at 54.4% when few were positive for equities.
The advisors classified as correction were again 31.1%. This group is mostly bullish but they expect an intervening market retreat before the rally begins. They look to buy on dips. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa.
The difference between the bulls and bears was 35.5%, remaining at its highest level for the current market rally, a negative signal. The difference stood at 40% in Oct-07.
One reading that did change was the 10-week average ratio of the 'bulls' divided by the sum of the 'bulls & bears'. That figure eliminates the correction advisors. This week it is overbought territory at 70.8%. That is the highest level for that reading since 27-Jul-07 when it read 71.5%. That was about three months before the all-time market high in October 2007. Overall, this figure suggests some additional market gains may occur in the near term but markets may peak in the first quarter of 2010 and then correct from there.
The holiday season is almost upon us and some newsletter editors use these two weeks to take a break from their publishing schedules. In addition, last week's trading again showed the primary broad indexes moving up to test overhead resistance and pullback, as they have done repeatedly over the past two months so other advisors felt there was no reason to change their opinions. Those factors resulted in a week with unchanged readings for all three sentiment categories, a somewhat rare but not unprecedented result.
Markets began this week with solid gains and we finally saw breakouts to new highs for the NASDAQ Composite and S&P 500. Technology shares are showing leadership in this latest move higher, the DJ industrials are lagging behind and still trade below 10,500. Our recent comments have noted a high level for the correction camp [short-term bears] and looked for upside index breakouts to shift some of their number into the bulls. That move may now occur and we could shortly see excess optimism around 60% that occurs around the time of a major top.
The bulls remained at 52.2%. That is their high since December 2007, when their number was retreating from 62.0% shown at that October's all-time market high. A year later at the first bear market lows the bulls had slipped to just 22.2%.
The bears were again at 16.7%. That is just above early December's 16.5% level. That was the fewest bears counted since June 2003, shortly after stocks rocketed up from the previous bear market lows in 2002 and early 2003. At the market highs in October 2007 the bears were 19.6%. A year later, the bears reached a fourteen year high at 54.4% when few were positive for equities.
The advisors classified as correction were again 31.1%. This group is mostly bullish but they expect an intervening market retreat before the rally begins. They look to buy on dips. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa.
The difference between the bulls and bears was 35.5%, remaining at its highest level for the current market rally, a negative signal. The difference stood at 40% in Oct-07.
One reading that did change was the 10-week average ratio of the 'bulls' divided by the sum of the 'bulls & bears'. That figure eliminates the correction advisors. This week it is overbought territory at 70.8%. That is the highest level for that reading since 27-Jul-07 when it read 71.5%. That was about three months before the all-time market high in October 2007. Overall, this figure suggests some additional market gains may occur in the near term but markets may peak in the first quarter of 2010 and then correct from there.
Wednesday, December 2, 2009
Overview
This week's data included a new twelve year high for the advisors projecting a correction, along with lower readings for both the bulls and the bears. As things stand, the indexes continue to flirt with 2009 highs. Pullbacks last week was brief and followed quickly by new buying. However, we have noted a narrowing of the participation. Fewer industry sectors are rallying and the measures of individual stock activity are slowing substantially from the initial index highs attained in the summer.
The bulls were down slightly to 50.0% after last week's 50.6% reading, which equaled their September high. Both are still up nicely from the start of November, when a market pullback saw their number drop to 44.4%. The advisors continue to show a major sentiment shift from a year ago when the bulls were just 22.2%. That was almost a twenty-year low going back to 15-Nov-88 when the bulls were 21.1%.
We continue to see fewer and fewer bears. They were just 16.7%, down from 17.6% the previous week and 26.7% the first week of November. That is the least bears since 13-Jun-03 when we counted them at 16.1%. Again we note a major shift over the last year from 54.4% in Oct-08.
Advisors classified as correction rose to 33.3% from 31.8% a week ago. This group is mostly bullish but they look for an intervening market retreat before they will commit new funds. They look to buy on dips. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa. This is the highest reading since 5-Sep-97 when they were 33.9%.
The long-term bears are at their lowest level in over six years, while the short-term bears (those for a correction) are at their highest level in over twelve years - a very unusual pattern. The bulls are also well below where they were at the market peak in October 2007. This signifies there are not a lot of raging bulls out there. But there are also many advisors who would like to become bulls if the market pulls back. As the markets often confounds expectations, we could see a year-end rally to new highs that could force the correction camp to capitulate and buy on strength. That, we think, could mark the top.
The difference between the bulls and bears was 33.3%, up just 0.3% from last week and another bearish reading. That last time we had such a large negative difference was in late 2007, just after the all-time high in the DJIA, pushing the spread over 40%.
Bullish Themes
“Daily Commentaries:
Nov-19: I was happy with my numbers because they saw the decline to be net bullish. Once again the bears will have to wait. It's not going their way.
Nov-20: My bullish numbers abound. Here we saw 5 OBV 'higher downs' but only 1 OBV 'lower down'.
Nov-23: Technically stocks are rising because they are following their technical signals which are bullish. The bears have no legitimate bearish signals.
Nov-24: Seem to be right on the verge of a huge year-end run-up of several hundred points.” (25-Nov-09):
Joseph A. Granville's The Granville Market Letter, PO Drawer 413006, Kansas City, MO 64141 (800-876-5388)
Correction/Bearish Themes
[Correction Theme] “Market Summary:
1. Hints of quality spreads deteriorating suggest a counter-cyclical equity correction.
2. Bond Barometer is only one component from a bearish signal. Inflation Barometer
rises to 90%. Despite that, a final short-term bear market rally is likely.
3. The Dollar frustrates bull and bear alike. We're sill waiting for a resolution.
4. Gold is getting frothy but no technical signs of a peak, except the shares fail to confirm
the new gold high.
5. The Chinese (FXI) and Russian (RSX) ETF's violate their bull market trendlines for relative
action against the World Index.
6. Japan's ETF (EWJ) relative line is at a multiple year low. Is a crisis developing as a prelude
to the end of the 21-year Japanese secular bear market?” (December 2009)
Martin Pring's InterMarket Review,4830 Sweetmeadow Cr, Sarasota FL 34238 www.pring.com
[Bearish Theme]
“Trading over the latest two months shows a notable loss in upside price momentum and increasing deterioration in market breadth and volume indicators. In contrast to the indices weighted by large US multinationals that benefit from the weakness in the U$, the broadly based indices such as the NYSE Composite and the Russell 200 failed to make new higher highs last week.
Our last issue featured a chart showing the bearish divergence of NYSE Upside/Downside Line from the NYSE Composite. The same divergence has developed in trading on the NASDAQ. The NASDAQ Composite, until recently among the top performing indices, also shows deterioration in price momentum since the index made the intermediate mid-September highs. That is, when the 14-day RSI last matched the high in the index.
Last week the new highs in the large cap indices such as the DJI and the S&P 500 failed to be confirmed by the NYSE A/D Line, an indicator that until mid-October, has the led the NYSE price indices. Another non-confirmation of last week's new highs in the price indices was a shrinking in the number of stocks hitting new highs.” (December 2009)
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