Here Is A Huge Key To The Markets

Here Is A Huge Key To The Markets

With global stock markets on the move, investors and professionals are wondering where the markets are headed from here.  KWN thought it would be a good time to pass along key indicators which help provide a clue as to the future direction based on sentiment.

Here is the latest Investors Intelligence report along with the all-important sentiment chart:  “Stocks rallied further last week with more indexes ending at new closing highs.  Many show new records while the NASDAQ highs are from 2000 ... Indicators are bullish but also overbought with many at prior highs.  The quick recovery from June's selloff was hard to ignore and more newsletter editors turned bullish.  That figure would have been even higher except for a few shifts away from that outlook from advisors who noted negative divergences with the new highs.



With the third consecutive higher reading the bulls were 52.1%, from 46.9% a week ago and their 2013 low at 41.8% two weeks before that.  With many indexes quickly back to highs the quote ‘don't fight the tape' [or Fed] was repeated more than once.  After a 10.5% increase the bullish reading is approaching its mid-May high of 55.2%.  With the averages at or above readings from that date the bulls could increase further and reenter that danger level [55% and above] that suggests close to fully invested exposure.  That was last shown at the April 2011 peak.

The bears were 19.8%, pulling back from last's week's increase to 22.9%.  It is hard to hold a negative outlook as stocks rally and indexes set daily new highs.  The bears did have some weak economic data to support their case and they continue to express fears that only the Fed bond buying is supporting the market.  The bears are just 1% above their low for the last year and the lack of pessimism is another negative sign for additional market gains.

There was also a lower reading for the correction, down to 28.1%.  That was down from 30.2% and no surprise with the quick market recovery of its up to 71⁄2% June swoon.  There is a group of advisors shifting between bulls and correction, but they haven't yet returned to this view even with the indexes at/above their May peaks.  Some did ‘buy the dip' and they still maintain those recently acquired positions.
Read Full Article