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Peter Brimelow Archives | Email alerts
May 14, 2012, 2:47 a.m. EDT
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By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” Two down weeks "” are stocks starting another summer sag?
First a proprietary word: On Friday night the Hulbert Stock Newsletter Sentiment Index, reflecting the average equity exposure recommended by timing letters tracked by the Hulbert Financial Digest, stood at 14% exposure. That was up from 8.8% on Thursday night (although this could be noise, caused by one advisor switching).
Mark Hulbert still believes that his sentiment indicator's moderate reading on April 2, the day of the stock market's high, and its recent levels, respectively reflect neither the euphoric excess nor the stubborn bullishness associated with major market breaks. He still thinks any coming correction will be more modest than in 2011 or 2010. See Hulbert column on April 11.
But Hulbert's reading is distinctly calmer than the market timers I usually look at. (However, note that Cabot Market Letter and Sound Advice have not seen fit to update since I last wrote about them, so presumably their respective cautious bullishness and cautious bearishness has not deteriorated further. See May 10 column and April 12 column.
Dow Theory Letters' Richard Russell says he's out of stocks completely. "The market has been quiet for a while. I think something big is coming up, and I don't think it will be good. Caution is the watchword now. This is the quiet before the storm."
In the light of J.P. Morgan $2 billion trading loss, the question being asked is if Wall Street will ever learn.
Russell complains about weakness in copper and oil prices. He adds: "Below is a chart that bothers me. Morgan Stanley's chart of world markets minus the U.S. market. What I see here is a down-sloping head-and-shoulders formation that is breaking down, and breaking down below both its 50-day and 200-day moving averages."
Russell also says "China is falling apart" "” because iShares Trust FTSE China 25 Index Fund /quotes/zigman/357940/quotes/nls/fxi FXI -1.34% has fallen below key moving averages.
Stealth Stock Daily's Dennis Slothower is still 20% invested, high for him. See January 5 column
But in his typically cynical way, Slothower wrote Friday of one of his favorite technical indicators: "Primary dealers are fighting to keep support at the weekly middle Bollinger band line (1,354 for the S&P 500 Index /quotes/zigman/3870025 SPX -0.34% , as they make their arguments before the Fed for more QE liquidity injections. It looks to me like the market may try and rally going into next Wednesday's Fed minutes in which the Fed may give us their latest insights on whether there is going to be another QE or not."
Slothower's conclusion: "Frankly, given how bad the news is turning, institutional investors seem to be betting on such an outcome."
Slothower cites weakness in Europe, China, and in the gold price: "These are recessionary warning signs . . . evidence that another financial crisis spreading."
Finally, and in some ways the most depressing, the current climate has convinced the Aden Forecast's Pam and Mary Ann Aden to restrain their usual tactical opportunism. See April 23 column
They write in their most recent issue: "The world has taken yet another sharp turn. The markets are nervous and so are investors. Risk is off. Many of the markets have dropped sharply, they're under pressure and they could fall further."
The Adens are 20% in U.S. stocks, but they recommend: "Don't buy new positions for the time being."
Paradoxically, the Aden's are bullish on long-term U.S. bonds (20% of their recommended asset allocation) and on the U.S. dollar, which they describe meaningfully as "a safe haven, for now."
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Peter Brimelow has been an editor at Barron's, Fortune and Forbes and is the author of "The Wall Street Gurus: How You Can Profit From Investment Newsletters."
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