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Mike O'Rourke at BTIG argues that we must be close:
The other interesting development today was on the sentiment front. AAII Sentiment as we calculate it (Bulls/(Bulls + Bears)) was 29.54% in buy signal territory. It is not as good as the reading registered last month, but good enough to rank it 4th best in the last two years following November 6, 2009’s reading of 28.57%, July 9, 2010’s 26.84% and the two decade low registered March 6, 2009 at 21.21%. The Hindenburg Omen made it to the front of our Yahoo! News page. A six basis point increase in the quarterly report of the Mortgage Bankers Association’s 30 day delinquencies was covered in the media as if the second sub-prime crisis was again upon us. Besides the fact that it was 6 basis points, it is coming primarily from failed modifications. We get monthly snapshots from Lender Processing Services and Bloomberg so there are no shocking revelations in the MBA report, which overall exhibited improvements. Meanwhile, positive stories seem to get missed, such as Moody’s asserting yesterday that credit card losses have peaked even if Unemployment rises to 10%. In addition, Moody’s noted that “Falling charge-offs led to excess spread widening by 57 basis points to 10.44% in July, breaking the 10% level for the first time in the 20-plus year history of Moody's Credit Card Index.” This is the good type of spread widening. It represents the profits banks make on a card program.
There are only two things we feel like we are missing going into tomorrow’s GDP report: Volume and a 30+ reading on the Vix. The ideal setup for tomorrow would come from the result of an ugly Q2 GDP revision tomorrow. Every hour, a tenth of one percent comes off the market’s expectations of tomorrow’s revision. It is hard to remember the last time the market was so enamored with a backward looking number. We recognize a large downward revision will influence estimates for the balance of 2010 and the forecasts for 2011, but we did sell off on most of the weak initial inputs as the data was reported in the past few months. Nonetheless, any ugliness or sloppiness tomorrow morning should prove to be a buying opportunity.
Anyway, should be an exciting day.
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