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Mark Hulbert
Feb. 23, 2011, 12:01 a.m. EST
View all Mark Hulbert "º
"¹ Previous Column
A contrarian analysis of the gold market
First Take "º
Washington Post Co. earnings: uh-oh
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” That was then. Now is now.
Still, the similarities between today's stock market and the one that prevailed late last April are striking "” and disturbing:
Late last April, of course, the stock market had risen far higher than most investors over the previous few months had dared to hope "” just like now.
Late last April, bullish sentiment rose to higher levels than had been seen in many months, if not years. Bullish sentiment today is nearly as high.
Then as now, a geopolitical crisis caught the market by surprise. The precipitating event then was the sovereign debt crisis in Europe; today it is unrest in Libya and throughout the Middle East.
Late last April, the stock market soon encountered big air pockets, most famously the Flash Crash on May 7, in which the Dow dropped nearly a thousand points in just a few minutes' time. It is too soon to tell if the market will encounter similar air pockets today, but it did fall 2% earlier this week upon returning from its three-day weekend and confronting the news from the Middle East.
/quotes/comstock/10w!i:dji/delayed DJIA 12,113, -100.17, -0.82%
Consider the average recommended stock market exposure among a subset of short-term market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). On the day late last April when the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,113, -100.17, -0.82%) hit its pre-correction high, this average stood at 65.5%.
Today, in contrast, the HSNSI stands at 58.2%. The slight difference between these two readings offers very little hope to contrarians.
Even more ominously, consider the average recommended exposure among just those market timers who focus on the NASDAQ market. This average is a good barometer of sentiment because the NASDAQ market is particularly sensitive to mood changes among retail investors.
Today, this NASDAQ-centric average stands at 73.3%, in contrast to 72.9% on the day of the stock market's late-April high.
The stock market often encounters air pockets when sentiment is this high, for the simple reason that, at such times, the market's level already reflects the expectation that most of what will be coming down the pike is good news. Almost by definition at such times, therefore, the unexpected will be bad news.
The key thing contrarians will be focusing on in coming sessions: How sentiment reacts to any weakness that does develop. It will be a bad sign if the currently bullish timers stubbornly hold onto their optimism, and a good omen if they react to any weakness by running for the exits.
But early indications are not encouraging: The average recommended equity exposure didn't budge on Tuesday, despite the huge loss for the market.
Stay tuned.
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.
Add Comment › · Recommend (5) · Post: Alert Email Print More Mark Hulbert Feb. 22, 2011 A contrarian analysis of the gold market Feb. 15, 2011 Bullish sentiment is high "” maybe too high Feb. 11, 2011 Investing without making any forecasts Feb. 9, 2011 Will market soon surpass its all-time high? Feb. 8, 2011 Corporate insiders steadfastly bearish Explore related topics Dow Jones Industrial Average Comments Screener About Mark HulbertMark 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.
First Take Washington Post Co. earnings: uh-ohWashington Post Co.'s education arm took a beating in the fourth quarter and investors should be concerned, writes Jon Friedman.
10:26 a.m. Today10:26 a.m. Feb. 23, 2011
Most Popular Most readMost commented U.S. stock futures rise after steep selloff Market Crash 2011: It will hit by Christmas Ominous parallels to market last April Stocks extend losses as oil tops $100 Gadhafi does it again The best laid plans ... Stocks extend losses as oil tops $100 U.S. stocks thrown hard by Libyan unrest U.S. stock futures rise after steep selloff H-P deepens drop; Chesapeake slips Find a Broker Partner Center » MktwHulbert's Latest Tweets"Mark Hulbert: Ominous parallels to market last April http://on.mktw.net/ffvSUN" 12:50 a.m. EST, Feb. 23, 2011 from MktwHulbert
"Mark Hulbert: A contrarian analysis of the gold market http://on.mktw.net/gQfAlD" 12:22 a.m. EST, Feb. 22, 2011 from MktwHulbert
"Mark Hulbert: Bullish sentiment is high "” maybe too high http://on.mktw.net/fQ0CIQ" 12:02 a.m. EST, Feb. 15, 2011 from MktwHulbert
"Mark Hulbert: Investing without making any forecasts http://on.mktw.net/f8NqfY" 12:44 a.m. EST, Feb. 11, 2011 from MktwHulbert
"Mark Hulbert: Will market soon surpass its all-time high? http://on.mktw.net/h7ibmA" 12:51 a.m. EST, Feb. 9, 2011 from MktwHulbert
/quotes/comstock/10w!i:dji/delayed Dow Jones Industrial Average (DJIA) /marketstate/country/US The market is open2:30:47 pm The market is closed2:30:47 pm 12,113 Change -100.17 -0.82% Volume 132.52m Real time quotes var embeddedchart70394702Chart = new EmbeddedChart('#embeddedchart70394702', NormalChartStyleNoDecimals, 190, 90, '1dy', '5mi', null, null, null, 'US:DJIA'); jQuery.data($('#embeddedchart70394702').get(0), 'embeddedchart', embeddedchart70394702Chart); Add to portfolio DJIA Find a Broker Create alert Featured Commentary » Next: Marshall Loeb
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MarketWatch Top Stories Link to MarketWatch's Slice. 15 $(".bgCurrencyFormatting").data("bgFormat", { last: "#,###.0000", change: "#,###.0000", percentCConsider the average recommended stock market exposure among a subset of short-term market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). On the day late last April when the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,113, -100.17, -0.82%) hit its pre-correction high, this average stood at 65.5%.
Today, in contrast, the HSNSI stands at 58.2%. The slight difference between these two readings offers very little hope to contrarians.
Even more ominously, consider the average recommended exposure among just those market timers who focus on the NASDAQ market. This average is a good barometer of sentiment because the NASDAQ market is particularly sensitive to mood changes among retail investors.
Today, this NASDAQ-centric average stands at 73.3%, in contrast to 72.9% on the day of the stock market's late-April high.
The stock market often encounters air pockets when sentiment is this high, for the simple reason that, at such times, the market's level already reflects the expectation that most of what will be coming down the pike is good news. Almost by definition at such times, therefore, the unexpected will be bad news.
The key thing contrarians will be focusing on in coming sessions: How sentiment reacts to any weakness that does develop. It will be a bad sign if the currently bullish timers stubbornly hold onto their optimism, and a good omen if they react to any weakness by running for the exits.
But early indications are not encouraging: The average recommended equity exposure didn't budge on Tuesday, despite the huge loss for the market.
Stay tuned.
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.
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.
Washington Post Co.'s education arm took a beating in the fourth quarter and investors should be concerned, writes Jon Friedman.
10:26 a.m. Today10:26 a.m. Feb. 23, 2011
"Mark Hulbert: Ominous parallels to market last April http://on.mktw.net/ffvSUN" 12:50 a.m. EST, Feb. 23, 2011 from MktwHulbert
"Mark Hulbert: A contrarian analysis of the gold market http://on.mktw.net/gQfAlD" 12:22 a.m. EST, Feb. 22, 2011 from MktwHulbert
"Mark Hulbert: Bullish sentiment is high "” maybe too high http://on.mktw.net/fQ0CIQ" 12:02 a.m. EST, Feb. 15, 2011 from MktwHulbert
"Mark Hulbert: Investing without making any forecasts http://on.mktw.net/f8NqfY" 12:44 a.m. EST, Feb. 11, 2011 from MktwHulbert
"Mark Hulbert: Will market soon surpass its all-time high? http://on.mktw.net/h7ibmA" 12:51 a.m. EST, Feb. 9, 2011 from MktwHulbert
Older Americans are powerful consumers
Money and Power
Public pensions are the least of our worries
On the Markets
That was then. Now is now.
Media Web
Carmelo Anthony: N.Y. gain is NBA loss
Minyan Market Musings
War as the second derivative of the crisis
Tech Tales
Read Full Article »