The ratio of bulls and bears in the latest AAII sentiment survey is unhealthy for the stock market on the short-term view. In fact it is as close to as unhealthy as it gets during the cyclical bull out of 2009.
Sentimentrader has a cool new chart engine that allows you to dial back a chart to historical views. This one shows a declining trend in sentiment during the Greenspan era cyclical bull (2003-2007) and a rising one on the current cycle. This one may be destined for higher highs in sentiment before it flames out.
But the recent cluster of spiking activity is sufficient to get a good correction going in the interim. That said, over bullish sentiment is a condition of a top, not a directive.
Here’s the up close (2014) view showing a level of 73, nearly matching the one that brought the January market disturbance.
HUI has declined to 215 and made a marginal lower low from the start of the bear flag in the 216’s. We had been anticipating 210 as the critical support to a bottoming scenario. So, given the proclivity of this sector to test limits, let’s keep that alive.
A ‘White Paper’ article on contrary indicators in the emotion packed gold sector. Make it them work for, not against you.
The gold sector is peopled by a high concentration of contrary indicators because it is a relatively (to the vast world of equities and bonds) small market that offers refuge from some of the damaging aspects of the spectrum of investment products that are supported by the manipulation of interest rates and printed (and digitally created) money supplies. Thus, gold has moral high ground if an asset can be thought to have morality.
I am not going to name names or direct links to the source because I think what goes on in another manager’s shop between himself and his subscribers is their business, not ours. But I did note that an astute precious metals oriented trading service just had a public talking to with its subscribers, many of whom apparently are really feeling the grind of this consolidation in the precious metals.
That is a good thing because as NFTRH has been noting for a couple weeks now the mounting bearish CoT data and the over bullish sentiment have been bad things… for the short term (with not hardly a peep about them from the ‘community’ I might add). So seeing a capable trader’s subscriber base getting antsy (or worse) is very positive in that it implies that maybe gold bugs are getting jumpy and feeling the heat, which is what any good correction should do.
The manager does by the way advise that people back off of leverage and/or large position size if the ability to sleep is being compromised. I for one do not have the psychological makeup to endure significant draw downs on my portfolios, so as advised in NFTRH a few weeks ago, I began the process of trimming positions to be in line with my makeup.
That is good advice for everybody folks. We are each of us only human and subject to different levels of emotion and discipline. First rule of trading and investing… know yourself. Don’t think you know yourself. Know yourself!
1929 Crash Analog? That was so February 21, 2014. This morning MarketWatch has a headline that can neuter the bullish effects of the Analog and its brethren that have littered the media at the slightest hint of trouble in the stock market. This gives me more bearish feelings than any red futures would on any given day. The market eats those for breakfast.
Meanwhile, the dumb money is lapping it up again…
And I continue to love the quiet beauty of this chart…
Still not a word about it outside of this little corner of the interwebs. Nice and quiet… ssshhhh…
Will you look at those ‘risk ON’ lunatics go? They’re irrepressible in their lust for return I tell you. Keep chasing the dream you crazies.
I [they] Learned to Stop Worrying and Love the Bomb [Market] paraphrasing Stanley Kubrick’s great cold war/nuclear paranoia film Dr. Strangelove (1964).
The USA thrived during a 20th century rife with war, famine and depression. This was a wealthy country however, founded on principles of self-reliance and valuing thrift, saving and honest work for an honest return. Add in unparalleled productivity and economically at least, the positives more than outpaced the negatives.
Guest Post by Elliott Wave International
How do you know when the market is getting ready for a change? This quote from Bob Prechter’s best-selling book, Conquer the Crash, looks at investor psychology at extremes in the markets:
The engine of high stock market valuation is widely shared optimism. The greater the degree of the advance that is ending, the greater the optimism at its peak. Optimism also tends to remain strong in the early stages of a bear market …
NFTRH 270 does a good job of defining what is in play for the stock market and going the other way, the precious metals, as we close out a very interesting year. I am especially intrigued by the possibilities implied by the ‘continuum’ chart (long-term T bond yields) near the end of the report, given the current state of the bond’s yield at a potential limiter in the monthly EMA 100.
If you’d like to take what you read on this site to a much more detailed level, why not try a subscription? Especially now that a 30 day free trial, with no strings attached, is being offered. If you are a pure stock trader, please do not bother. You will likely not be satisfied. But if you want to be on the right side of infinitely interesting markets going forward, have a look.
With a Sling and a Stone
This is the kind of thing that always gets punished. When the “community” starts congratulating itself for a job well done, a big hit is sure to follow. Every time.
“Congratulations to those in the GATA, King World News, and GoldMoney communities who have contended that the pounding done to the monetary metals in recent months was engineered to allow the bullion banks to escape their short positions, to support the Federal Reserve’s repudiation of its plan to reduce its bond buying, and to support money printing by central banks generally. Special recognition in this respect may go to Sprott Asset Management’s Eric Sprott and John Embry, GoldMoney’s James Turk and Alasdair Macleod, market analyst Ted Butler, Andrew Maguire, and Hong Kong fund manager Bill Kaye, among others.
Today’s retreat from “tapering” by the Fed may have exposed the whole U.S. government as a big bluff in regard to the economy.”… and so on and so forth.