Investment advisor bulls rein in their horns
Nasdaq up ~0.5%, S&P 500 edges green, Dow down ~0.3%
Tech leads S&P 500 sector gainers; Real Estate weakest group
Dollar ~flat; gold up >1%; bitcoin up >2%; crude up ~3%
U.S. 10-Year Treasury yield dips to ~3.91%
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INVESTMENT ADVISOR BULLS REIN IN THEIR HORNS
The American Association of Individual investors (AAII) produces a weekly survey of stock market sentiment among its members. The survey is widely used as a contrarian indicator.
Last week, AAII reported that bears danced to a nine-month high.
Investors Intelligence (II), a global investment service, also releases a weekly sentiment survey which is also closely followed, and, at extremes, may also be useful as a contrarian measure of sentiment.
II, however, surveys independent market newsletter writers and assesses each author's current view on the market: bullish, bearish, or correction.
According to the most recent II data, 46.9% of investment advisors are bullish. That is down from 64.2% in mid-July. That July high was the highest reading since 64.4% in early December 2020.
In early July, just 19.4% of advisors were expecting a correction, which was also its lowest reading since early December 2020. That percentage has now jumped to 34.4%.
18.7% of advisors are bearish, which is its highest reading since early May of this year.
Of note, just after bulls hit 62.5% on March 27 of this year, the S&P 500 index .SPX sold off about 6% from its March 28 intraday high to its April 19 intraday low.
More recently, after bulls hit a near 4-year high, the SPX has sold off as much as 9.7% on an intraday basis, and 8.5% on a closing basis, from its July 16 highs into its August 5 lows.
Meanwhile, the bull - bear spread is at 28.2%. The spread's 2024 high was at 49.3% on July 17, reported one trading day after the S&P 500's high, whereas the spread's 2024 low was reported on April 17 at 24.7%, which was two trading days before the S&P 500's April trough.
As it stands on Monday, the S&P 500, at around 5,340, is still down nearly 6% from its record closing high. Traders will be monitoring the spread in the event it deteriorates further.
Specific periods when the bull-bear spread plunged into negative territory, such as December 2018 and March 2020, did a very good job of signaling extreme bearishness that occurred around major market lows.
Although the early and mid-2022 sub-zero troughs proved premature in terms of signaling a major low, counter-trend market strength did develop around those times. The October 2022 trough in negative territory did occur around another major market low.
(Terence Gabriel)
*****
FOR MONDAY'S EARLIER LIVE MARKETS POSTS:
NVIDIA AND SUPER MICRO RALLY AI RALLY RETURNS - CLICK HERE
U.S. STOCKS DIP AT THE START OF A DATA PACKED WEEK - CLICK HERE
MOMENTUM STILL LEADS, BUT IS IT COMING UP LAME? - CLICK HERE
LACK OF DIRECTION TO KEEP S&P 500 RANGE BOUND - MS - CLICK HERE
FADE THE REBOUND IN STOCKS AND BONDS - BCA RESEARCH - CLICK HERE
MARKETS SERENE BUT SENSITIVE AHEAD OF KEY US DATA - CLICK HERE
SUMMERTIME SADNESS - CLICK HERE
SMOOTH SAILING - CLICK HERE
FUTURES IN THE GREEN - CLICK HERE
MARKETS SHIFT TO HOLIDAY MOOD - CLICK HERE
II08122024B https://tmsnrt.rs/4fESENr
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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