“According to BofAML's new Bull & Bear Index, investor sentiment toward risk assets is at a more bullish level today than 99% of all readings since 2002. The current reading of 9.6 (out of 10) is close to max bullish and thus triggers a contrarian "sell" signal for risk assets. In their view, the relative risk-reward of owning equities is unfavorable at this juncture. Since 2002 a "sell" signal of 8.0+ was on average followed by a 12% peak-to-trough correction in global equities within three months.” – Full story with charts and analysis from ZeroHedge at
http://www.zerohedge.com/news/2013-02-12/sentiment-more-bullish-99-all-prior-readings
BUSINESS SENTIMENT
“Small Business Sentiment: Up Fractionally, But Still One
of the Lowest Readings in Survey History - Doug Short, February 12, 2013 See dshort.com for the story…http://advisorperspectives.com/dshort/updates/NFIB-Small-Business-Optimism-Index.php
NTSM SENTIMENT
The NTSM
sentiment value as of today’s close was 64%-bulls. That’s a 5-day moving average of
Bulls/(Bulls+Bears) where the value used is the amount of dollars bet in
selected Bull and Bear Guggenheim funds.
The current sell signal is 67% for this indicator, so the markets are
getting very stretched by many measures.
As more and more investors think the market will go up; the less likely
it is that they will be right.
MARKET RECAP
Wednesday, the
S&P 500 was up 1pt to 1,520 (rounded).
VIX was up about 2.7%, to 12.98.
I measure Breadth
via the percentage of stocks advancing (ignoring unchanged stocks). The percentage of stocks advancing for the
S&P 500 is above 55% for the 10, 20, and 50-day moving averages. Those are positive values for the markets. Today 59% of stocks on the NYSE were
advancing.
There were 323
new-highs on the NYSE with only 6 new-lows for a spread of 317. Ignoring
January, that’s the highest value since mid-September.
Given that the market
internals were quite positive today and the market went nowhere, I think tomorrow
(Thursday) should be an up day.
NTSM
Wednesday, the NTSM analysis remained BUY at the close.
That doesn’t mean this is a great time to buy (I think we
are near a short-term top); but it’s an indication that the market trend is
strongly up.
Yesterday was only the second “BUY” signal by the VIX
indicator in the last month. VIX is the
best indicator in the NTSM analysis as back-tested to 2005 and it is nice to
see a buy signal from the options boys. VIX
was Buy again today, although the value was up for the day, the longer term
trend has been down.
I am waiting for a significant up move, perhaps 1% in any given day. If I see it, I will
heavily short the market as a short term trade with tight stops. A 1% move up might be the signal for a
tradable 5-10% pullback (assuming Congress doesn’t allow the sequestration cuts). This is for short-term money.
For my long term investments, I will watch the NTSM
indicators. Right now the longer term
indicators are BUY with a HOLD very possible in a day or two.
If Congress allows the 8% budget cuts to go through (sequestration or others), I
expect a downturn in stocks. With
significant cuts in Government spending, it is anybody’s guess whether
investors will decide that this is a major top, or if it will be a minor
pullback.
MY INVESTED POSITION
Based on a BUY
signal 7 of 9-days, and more importantly, consecutive closes above the prior
high of 1466, I moved into the stock market at 1471 on the S&P 500 on 14
January. I am currently invested in a
range of near 50% invested in stocks.
