The market continues to show strength. I thought there would be some weakness because of Google's earnings miss and the poor econ. numbers. From all the blogs I read there are a lot of bearish commentary and predictions. I feel bearish myself too because we are having lower highs and lower lows in the daily and weekly time frames.
There are two blogs that have a different view. Carl Futia sees the S&P rallying to 1600 in 3-4 months. He has been steadfastly bullish through our recent decline. He gives his reasons in his blog for his forecast. Another blog that I follow is Between the Hedges. This is his major reason for believing that the bull market is not over. If his data is correct then I too find it hard for the market to break lower with all these bearish sentiment. What do you guys think? Are we still in a bull market or are we starting a bear market?
"The AAII percentage of bulls rose to 25.1% this week from 24.3% the prior week. This reading is still at a very depressed level. The AAII percentage of bears rose to 59.0% this week from 54.4% the prior week. This reading is still at an extraordinarily elevated level. The last time the AAII % Bears was this high was October 18, 1990 after Iraq’s invasion of Kuwait and before Operation Desert Storm began on January 17, 1991. The peak of the 1990-1991 recession also occurred during 4Q 1990 as GDP fell 3.0%. The S&P 500 rose 65% over the next three years after this peak in bearishness. Moreover, the 10-week moving average of the percentage of bears is currently at 50.9%, also an extraordinarily elevated level. It has only been higher one other period in its history, which was September 1990-December 1990. Moreover, the 10-week moving average of the percentage of bears peaked at 43.0% right near the major bear market low during 2002. It is astonishing that the 10-week moving average of the % bears is currently 7.9 percentage points greater than at any time during the bubble bursting meltdown of 2000-2003, which was arguably the worst stock market decline since the Great Depression.
Furthermore, the 50-week moving average of the percentage of bears is currently 40.7%, also an extraordinarily elevated level seen during only one other period since tracking began in the 80s. That period was December 1990-April 1991, right near another major stock market bottom. The extreme reading of the 50-week moving average of the percentage of bears during that period peaked at 41.6% on Jan. 31, 1991. The current reading of 40.7% is above the peak in the % bears during the 2000-2003 bear market, which was 38.1% on April 10, 2003. I find this even more astonishing, notwithstanding the recent pullback, given that the S&P 500 is currently 86.3% higher from the October 2002 major bear market lows and 13.0% off its recent record high.
Individual investor pessimism towards US stocks remains deep-seated and historical in nature, which bodes very well for further outsized gains over the intermediate-term. This is just more evidence of the current “US negativity bubble.” It is also noteworthy that as investor pessimism grows ever thicker as short interest soars to new record highs, corporate insiders continue to display downright giddy behavior with their recent stock activity during this pullback. The retail sector saw substantial insider buying over the last six weeks, notwithstanding the current extreme investor pessimism towards the prospects for consumer spending. The Morgan Stanley Retail Index is up 14.0% over the last ten days. During the 2000 economic downturn after the bursting of the 90s technology stock bubble, insiders were bailing in droves. I still expect US stocks to rise sharply later this year as the undying belief in an imminent recession begins to fade and the uncertainty currently surrounding the financial sector continues to lift substantially." - Gary at Between the Hedges
- I have been trading for 5 years. It took close to a year before I became profitable. I find that I am improving gradually each year. My method of choice is scalping. My edge lies in tape reading NYSE stocks and staying on the side of the specialist. That is the method I learned when I started. As I build up my capital I will try new styles and trade new markets. In late 2006 my trading hit a rough patch after the introduction of the NYSE Hybrid system. For most of 2007, I have been on a search for new strategies that would help me adapt to the market.