Dumb money looking pretty smart, eh? Market sentiment is not really a finely tuned timing tool, but the above is representative of a condition that will be in place at the next minor and/or major market top.
With the exception of the Gold Bugs and to a lesser degree, the biotechs, the stock market is over bullish. It is debatable as to whether the recent semi-extreme readings were bull killers (I am sticking with an eventual cyclical top out in early to mid 2014). But it does appear (especially when factoring in things like the lack of leadership in the BKX-SPX ratio and the S&P 500 at a daily RSI topping point for example) that the market is ripe for a continued short term decline here. Adding to the case (graphics courtesy of the highly recommended Sentimentrader.com)…
Another thing that NFTRH 260′s 24 pages did not allow time for was a sentiment update, so here are some thoughts now with a graphic courtesy of Sentimentrader.com.
Unfortunately we are flying blind with respect to CoT data because the CFTC is shuttered up with the government shutdown. But here are the updates in other areas.
The mainstream media headline is VIX ‘Fear Gauge’ Jumps and bears are probably smelling a rat as the Debt Ceiling / Government shutdown drama drags on. This is the setup that preceded the bullish Fiscal Cliff and what seems like a hundred other government related dramas over the last year. We’ll see.
The public does not like gold or Uncle Buck right now. Something to think about. Another thing to think about is not being a ‘death of the dollar’ hyperinflationist when cheering gold because that is a sales pitch. Gold and the US dollar are promoted as hard core adversaries; but why? If a liquidity problem crops up they will both probably benefit. Graphics courtesy of Sentimentrader.com…
We have a bunch of economic data on tap for the market to get emotional over. Jerk to the left, jerk to the right; as if any one period’s data is anything other than a reason to game a market running on pure momentum.
And then we have Huey, Dooey, Louie and even a couple more popping out to dump even more signals on the market as we go full frontal Jawbone today:
“In addition, five Fed officials will be speaking on Thursday. From Milan, we’ll hear from Philadelphia Fed President Charles Plosser — his second speech in Europe this week — and Boston Fed President Eric Rosengren, who is a voting Federal Open Market Committee member. Dallas Fed President Richard Fisher, Fed. Gov. Sarah Bloom Raskin and San Francisco Fed President John Williams are also on tap to deliver speeches.”
It should be interesting if nothing else. Beyond any one day’s knee jerking, there is this to consider (graphics courtesy of Sentimentrader.com):
The ‘smart vs. dumb money’ structure is exactly opposite to what it was one year ago when we used this picture in support of a bullish stance:
And people just love stocks over bonds, almost as if there is a Great Rotation taking place or something. Ha ha ha…
The bulls are right and those that have been bulls for a year have been right for a year; both of them. In full disclosure, I was bullish as appropriate last spring and summer and then proceeded to not nearly maximize that fact. That’s show biz.
Now I am bearish. I hope to maximize that stance. There is a case for higher stock prices later in 2013 or early 2014. But for now, this pig is over loved just as it was over hated a year ago.
Something just did not square as the S&P 500 came to the long-standing target range of 1550-1590. That was the tendency of the ‘dumb’ money to jerk bearish every time the market took a 1% or 2% dump.
Enter bubble dynamics at the behest of an aggressive and out of control Federal Reserve.
To put it in non-technical terms, here is how one might interpret the mind of the Fed, if only the Fed’s members were a) honest enough or b) able to clear the dull haze of bureaucratic myopia in order to see what they are actually doing…
“Get your ass up there you pig. We know that our only way out of this is to inflate an asset bubble, making the rich ever richer and the poor more disenfranchised and dependent upon the system. We are playing with printed and keystroked [funny] munny after all and so far that munny is doing exactly as we wish in trying to indicate a wealth effect in the stock market.”
Well finally, the public is buying it and upside blow off dynamics can now be anticipated.
We have been following this and other market sentiment data every week and now the dots are finally starting to flee the middle (neutral) ground they have held for too long now. Finally, people are getting too bullish a market that is too far above certain moving averages and making readily definable patterns that provide measured targets.
I do believe big changes could be coming in May or June for our dear FrankenMarket.