I’ve been posting an abundance of bearish material lately so I thought I’d lighten the mood a bit with something that is pretty bullish. Current levels of volatility are consistent with very bearish longer-term psychological points. Historically, these sorts of readings have been bullish as the market’s participants are poorly positioned for any potential upside surprise. The following two charts provide from insights. The first is via Charles Schwab and Sentiment Trader:
“The final technical chart brings in volatility. On Friday, the market experienced the 17th time in the past three months that the S&P 500 SPY (exchange-traded fund trading the S&P 500) gapped by more than +/- 1% at the open and then didn’t close that gap during the day. This means that the S&P didn’t reverse enough to “kiss” the previous day’s close. As you can see in the chart below, this level of “unclosed gap” behavior has been seen only four other times since the early-1990s. All occurred while the market was forming a major bottom.”
The second chart shows the 2 month moving average for the VIX. Current readings (pardon the 24 hour old chart) are consistent with buying points on a 24 month basis. Granted, there are only three data points in the last 20 years, but the readings are consistent with high pessimism which tends to be consistent with being closer to a market bottom than top. Additionally, this is only one of many indicators that the modern day investor should track. Nonetheless, it’s worth keeping in your tool belt. Now, I can’t say that I am eating the cooking here because I still abide by my balance sheet recession trading approach, but it’s food for thought for the longer-term investor….As Warren Buffett says – be greedy when others are fearful. There’s little doubt that others are fearful…..
Source: Schwab
Who cares.
I’m done. I am outta here. After I visit the forums, that is.
The recently posted AAII bull/bear data wouldn’t tend to back up the “lots of fear about theory”.
From what I see about there’s very little genuine fear – more an orderly repositioning which seems to be very much discounting a Euro solution. It might just be me but the AAII data is almost surreal given what’s going on in the world. Perhaps we just assume everything will be bailed out these days?
I see complacency and apathy, not fear, and people are worn out. We’re living in a bailout world, and that has to play itself out over time. In the short term, we’re circling back to debt is good. Volatility and market timing to continue.
The tape continues very bullish. Think of all the stories/bad news that has been thrown at this market on a continual basis for over a year. My guess–if we are going down it will have to look like 87 or we are going up to test the all time highs. I lean to a test of the highs. In 30 years I have never seen a market withstand such a stream of pundits telling us why the world we know is ending. I’ll believe it when I see it.
I agree. The market has had a flooe undet it which cannot be breached. I believe some of this is foreign buyers looking for a safe haven return avove debt yields. Most of it is the worlds central banker…no matter how awful the debt overhang you simply dont fight the fed.
Heh TPC,
“…this is only one of many indicators that the modern day investor should track. …keeping in your tool belt. … can't say that I am eating the cooking here because I still abide by my balance sheet recession trading approach…”
You’ve previously talked about various tools in any investing approach, but in terms of what you are eating, i.e. your timing model … what is your specific philosophy there … e.g. would you characterize your thinking as something like …
macro(economic) 50% technical 10% financial/fundamental valuation (i.e. marketcap/GDP) 20% quantitative (momentum/trend, mean reversion) 20%
Or is it totally dynamic … your model in 2011 is totally different than what it was in 2008?
Thanks. (Heh, it’s nice to have a break from talking Greece and MMT!)
Woke up this morning with the same thoughts on bullish sentiment, but I’m wondering when the ECRI call for another Recession back in Sep will start to manifest itself.
Might as well come clean…..we bought 40% spy Monday at the close…sold some currency stuff at the open yesterday and bought 10% more into SPY at 121.
This isn’t complicated…..November and thanksgiving r good windows…I see the surveys also and they don’t seem overly bearish compared to what I’m reading…and seeing in the real world. My clients r taking 2-5% withdrawals right now..property taxes, holiday, helping family members…it’s tight out there. I say this based on my dailycalls with my clients…some r eating into portfolios to live. Actually it is almost many.
We see two totally binary outcomes here…either it breaks up over 1300(1320) or it totally breaks down below1150. So At 1210 we find the ” potential” to bounce. LORD I have no clue. I must admit that. But we bought.
And that folks is the market. I can make two different arguments here about why it should go lower or why it should go up…I have a third option of staying out. I chose to buy…my job is to preserve capital…but my job is to make money. The confusing signals always make me not want to be wrong for fear my clients will think I’m not good enough. That emotion that pops up for me…always tells me to do the opposite. So I did
I’ve been frustrated when I read an investor put out a report that recommends buying because of Santa, turkeys, and toothfairies. I’m not recommending u do anything. I get turkey and Santa rallies….but I’m saying I bought but I have no clue what the outcome will be. I’m still bearish. If your going to site a turkey or Santa rally …just be honest like I did and say u have no clue.
Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,
It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator…but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law. – Ann Barnhardt
This is an absolutely stunning letter…and a must read from one end to the other. I would also recommend that you distribute this article far and wide. The letter is posted over at zerohedge.com…and I thank reader Matthew Nel for being the first of many who sent me this piece. The link is here….and the link to he original letter posted at her website is here.
I read that they have 4 employees. That’s like me saying I am leaving the equity markets because I lost a bunch of money because of some other fraud. Who cares. You lost. You knew the game was rigged. We all know there isn’t enough oversight. It’s not like this is some secret. You have to be more understanding of risk management than ever in this environment. These people sound like they’re whining and making a political argument more than anything else. They lost. Forget them and their political rant. It’s meaningless. But I am sure it drummed up a lot of attention through fear mongering. Disgusting if you ask me.
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I’ve been posting an abundance of bearish material lately so I thought I’d lighten the mood a bit with something that is pretty bullish. Current levels of volatility are consistent with very bearish longer-term psychological points. Historically, these sorts of readings have been bullish as the market’s participants are poorly positioned for any potential upside surprise. The following two charts provide from insights. The first is via Charles Schwab and Sentiment Trader:
“The final technical chart brings in volatility. On Friday, the market experienced the 17th time in the past three months that the S&P 500 SPY (exchange-traded fund trading the S&P 500) gapped by more than +/- 1% at the open and then didn’t close that gap during the day. This means that the S&P didn’t reverse enough to “kiss” the previous day’s close. As you can see in the chart below, this level of “unclosed gap” behavior has been seen only four other times since the early-1990s. All occurred while the market was forming a major bottom.”
The second chart shows the 2 month moving average for the VIX. Current readings (pardon the 24 hour old chart) are consistent with buying points on a 24 month basis. Granted, there are only three data points in the last 20 years, but the readings are consistent with high pessimism which tends to be consistent with being closer to a market bottom than top. Additionally, this is only one of many indicators that the modern day investor should track. Nonetheless, it’s worth keeping in your tool belt. Now, I can’t say that I am eating the cooking here because I still abide by my balance sheet recession trading approach, but it’s food for thought for the longer-term investor….As Warren Buffett says – be greedy when others are fearful. There’s little doubt that others are fearful…..
Source: Schwab
Who cares.
I’m done. I am outta here. After I visit the forums, that is.
The recently posted AAII bull/bear data wouldn’t tend to back up the “lots of fear about theory”.
From what I see about there’s very little genuine fear – more an orderly repositioning which seems to be very much discounting a Euro solution. It might just be me but the AAII data is almost surreal given what’s going on in the world. Perhaps we just assume everything will be bailed out these days?
I see complacency and apathy, not fear, and people are worn out. We’re living in a bailout world, and that has to play itself out over time. In the short term, we’re circling back to debt is good. Volatility and market timing to continue.
The tape continues very bullish. Think of all the stories/bad news that has been thrown at this market on a continual basis for over a year. My guess–if we are going down it will have to look like 87 or we are going up to test the all time highs. I lean to a test of the highs. In 30 years I have never seen a market withstand such a stream of pundits telling us why the world we know is ending. I’ll believe it when I see it.
I agree. The market has had a flooe undet it which cannot be breached. I believe some of this is foreign buyers looking for a safe haven return avove debt yields. Most of it is the worlds central banker…no matter how awful the debt overhang you simply dont fight the fed.
Heh TPC,
“…this is only one of many indicators that the modern day investor should track. …keeping in your tool belt. … can't say that I am eating the cooking here because I still abide by my balance sheet recession trading approach…”
You’ve previously talked about various tools in any investing approach, but in terms of what you are eating, i.e. your timing model … what is your specific philosophy there … e.g. would you characterize your thinking as something like …
macro(economic) 50% technical 10% financial/fundamental valuation (i.e. marketcap/GDP) 20% quantitative (momentum/trend, mean reversion) 20%
Or is it totally dynamic … your model in 2011 is totally different than what it was in 2008?
Thanks. (Heh, it’s nice to have a break from talking Greece and MMT!)
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