${Html.ActionLink("My MarketWatch", "index", new { controller = "composite", area = "section", page = "my" })} | !{Html.ActionLink("Sign out", "LogOff", new { area = "User", controller = "Account" }, new { id = "signOutLink" })}
Welcome, ${UserDisplayName}
Sign in
Become a MarketWatch member today
Mark Hulbert Archives | Email alerts
Nov. 4, 2011, 12:01 a.m. EDT
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” If it looks like a bear market rally, and smells like a bear market rally, then?
It's been exactly one month since the S&P 500 /quotes/zigman/3870025 SPX +1.88% dipped into official bear market territory. In the wake of the 17% rally since the Oct. 4 intra-day low, advisers have been falling over themselves retreating from the bearish camp and jumping back on to the bullish bandwagon.
/quotes/zigman/3870025 SPX 1,261.15, +23.25, +1.88%
That kind of behavior suggests that what we're seeing is a bear market rally.
I noted this disturbing sentiment trend one week ago, on the day of what so far has been the high for the month-old rally. Unfortunately, developments on the sentiment front since then paint an even more disturbing picture. ( Read my Oct. 28 column, entitled "Wall of worry gives way to slope of hope" )
Consider the average recommended equity exposure level among a subset of the short-term stock market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). Even though the stock market is lower today than where it stood one week ago, this average has continued to grow.
This suggests a stubbornly held optimism on the part of the average market timer, which is a dangerous condition, according to contrarian analysis.
Click to Play $(function () { $("#video_6E370B6B-D556-4F8E-8707-3938A1F73D3E").click(function (e) { e.preventDefault(); MarketWatch.Video.loadAndStartVideo('6E370B6B-D556-4F8E-8707-3938A1F73D3E', 'video_6E370B6B-D556-4F8E-8707-3938A1F73D3E', '287', '162'); }); }); After recent bottom, are we back in a bull market?Sentiment characteristics of the rally over the last 30 days suggest a bear-market rally, not a new bull market, according to Mark Hulbert, who says what's missing is more skepticism among investors and advisers. Nicole Hong reports. (Image: Getty Images)
The HSNSI is now 51 percentage points higher than where it stood a month ago. To put that in context, consider that over the first month of the last six bear markets, the HSNSI never grew by that much. In fact, the average increase in this sentiment index over each of those six bear markets' first month was just 19.9 percentage points.
These disturbing sentiment trends are even more evident among those market timers who focus on the Nasdaq market. That market is quite susceptible to changes in investor mood, and is therefore a particularly sensitive barometer of sentiment.
According to the Hulbert Financial Digest, the average recommended exposure levels among these timers is now 106 percentage points higher than where it stood a month ago. This is 12 percentage points higher than the week-ago level, even though the Nasdaq Composite Index /quotes/zigman/123127 COMP +2.20% is lower today than then.
Is there any way for the market to escape the bearish conclusion to which contrarian analysis leads? Advisors would have to beat a quick retreat in coming sessions which, while possible, appears unlikely.
The unfortunate conclusion is that the Oct. 4 lows are likely to be broken.
Click here to learn more about the Hulbert Financial Digest.
/quotes/zigman/3870025 Add SPX to portfolio SPX S&P 500 Index 1,261.15 +23.25 +1.88% Volume: 0.00 Nov. 3, 2011 5:13p var embeddedchart124732823Chart = new EmbeddedChart('#embeddedchart124732823', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:SPX'); jQuery.data($('#embeddedchart124732823').get(0), 'embeddedchart', embeddedchart124732823Chart); /quotes/zigman/123127 Add COMP to portfolio COMP NASDAQ Composite Index 2,697.97 +57.99 +2.20% Volume: 0.00 Nov. 3, 2011 5:30p var embeddedchart1186512883Chart = new EmbeddedChart('#embeddedchart1186512883', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:COMP'); jQuery.data($('#embeddedchart1186512883').get(0), 'embeddedchart', embeddedchart1186512883Chart); //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
var OB_permalink= 'http://www.marketwatch.com/story/looks-and-smells-like-bear-market-rally-2011-11-04'; var OB_Template="marketwatch"; var OB_widgetId= 'AR_1'; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ""; document.write(str); } Comments on this story 14 Comments Most Popular Jon Friedman's Media WebI really, really hate the Apple store
1. Mark HulbertLooks and smells like bear market rally
2. Portfolio Insights by Brett ArendsGreece is doomed, so buy Greece!
3. Howard Gold's No-Nonsense InvestingYou can't outguess this broken market
4. Commodities CornerShale sparks natural gas revolution built to last
5. Join the Conversation 14 Comments 1,000 characters My comments... Community guidelines » Add Comment Breaking Insight Jon Friedman's Media WebI really, really hate the Apple store
Howard Gold's No-Nonsense InvestingYou can't outguess this broken market
Mark HulbertLooks and smells like bear market rally
Portfolio Insights by Brett ArendsGreece is doomed, so buy Greece!
Find a Broker Partner Center » VideoAfter Great October, What of Market in November?
Looking for Superstar CEO to Save You? Look Within
Gold and the Dot-Coms: Comparing the Bubbles
10 Years Ago, Enron Scandal Changed Wall Street
About Mark Hulbert RSS News feedMark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
More from Mark Hulbert The best versus the rest A stock market versus a market of stocks Demographics and the stock market Strong cross currents at play in November Where to harvest stock market profits Featured Commentary » Next: Jon Friedman's Media WebMedia Web
I really, really hate the Apple store
Next: Thomas Kostigen's Impact InvestorImpact Investor
How we work is as vital as what we do
Next: Brett Arends' Portfolio Insights by Brett ArendsPortfolio Insights by Brett Arends
Greece is doomed, so buy Greece!
Next: Mark HulbertOn the Markets
Looks and smells like bear market rally
Next: Myra Saefong's Commodities CornerCommodities Corner
Shale sparks natural gas revolution
Next: Howard Gold's No-Nonsense InvestingNo-Nonsense Investing
You can't outguess this broken market
Next: Bill Mann's CanadaOn Canada
Railroads fill the oil pipeline gap
Next: Therese Poletti's Tech TalesTech Tales
Groupon insiders are already rich
Next: Rex NuttingMoney and Power
Full employment is 12 years away
Next: David CallawayEditor's View
Cannes protests should scare G-20
Next: Robert PowellOn Retirement
5 ways to improve the U.S. retirement system
Next: Peter BrimelowWall Street Irregulars
Sound Advice bullish, despite housing
WSJ WSJ MarketWatch MarketWatch Facebook Twitter Barron's Barron's SmartMoney SmartMoney AllThingsDigital AllThingsDigital FINS FINS More BigCharts Virtual Stock Exchange Financial News WSJ Asia WSJ India WSJ China chinese edition WSJ Japan japanese edition WSJ Europe WSJ Americas en Español em Português WSJ Radio WSJ Wine SEARCH 5:20 AM EDT November 4, 2011 /marketstate/country/us New York Closed /marketstate/country/uk London Open /marketstate/country/jp Tokyo Closed /marketstate/country/us /marketstate/country/uk /marketstate/country/jp View All Latest News /news/latest 5:08aEuro-zone Oct. composite PMI falls to 46.5
5:01aMutual fund, ETF investors live for the momentum
4:57aScope of China's slowdown under debate
4:43aBarclays's Diamond: 'better citizens' needed
4:11aBREAKING
European stocks extend gains in early trading
4:07aAsia stocks climb after European rate cut
4:03aGerman DAX index rises 0.40% to 6,157.93
4:03aBREAKING
Stoxx Europe 600 index up 0.49% at 243.22
4:03aU.K. FTSE 100 index trades up 0.52% to 5,574.31
4:03aFrance CAC-40 index advances 0.66% at 3,218.73
4:01aHong Kong's H-share index closes with 4% gain
4:01aBREAKING
Hong Kong's Hang Seng Index ends 3.1% higher
3:50aRoyal Bank of Scotland swings to quarterly profit
2:46aChina PBOC advisor: No aid for Europe for now
2:03aJapan's Topix closes with 1.8% gain at 752.02
2:03aBREAKING
Japan's Nikkei Average ends 1.9% higher at 8,801.4
1:57aChina's Baosteel sees buyer's market for iron ore
1:12aBREAKING
Australia's S&P/ASX 200 closes with 2.6% gain
1:11aOil futures ease slightly in Asian trading hours
12:24aGold holds ground after Europe-related gains
Loading more headlines... dow /quotes/zigman/627449/delayed 12,044.47 +208.43 +1.76% nasdaq /quotes/zigman/123127 2,697.97 +57.99 +2.20% s&p 500 /quotes/zigman/3870025 1,261.15 +23.25 +1.88% Kiosk 1291266000000 1291266000000Tools and Data
/conga/kiosk/currency.html 175572 1302573600000 1302573600000Alerts
/conga/kiosk/alerts.html 175576 1319608800000 1319608800000The Trading Deck
Nigam Arora Apple Siri is eating Google's lunch Apple's Siri is a voice controlled personal assistant that will surely put a dent in Google's click-dependent ad revenue. /conga/kiosk/trading-deck-1.html 176108 Read Full Article »