Friday, November 30, 2007

Bears Abound

Here is a chart of the American Association of Individual Investors bullish (green) and bearish (red) weekly sentiment reading. The chart comes courtesy of DecisionPoint.com (subscription required, but I think it is worth it!)

The latest bearish % is 56%, a level which has only been equaled or surpassed over the past 4 years by the bearish % at the June 2006 low and the March 2003 low. Both of these instances were followed by strong advances as you can see on the S&P bar chart above the sentiment bars.

This makes me even more confident that new bull market highs lay ahead.

12 comments:

Anonymous said...

Is it really that simple to make profits in the market, to be an contrarian? I read the blogger sentiment poll a Ticker Sense on occasion but never bothered to do a followup.

Carl Futia said...

A good question. The answer is NO.

First it is not simple to be a contrarian. Just looking at poll numbers like those cited in the post above won't do it.

Morever, most people are psychologically unable to think independently of the crowd.

I am writing a book on the art of contrarian trading for John Wiley but it won't be out until 2009.

Anonymous said...

BUY LOW SELL HIGH. BUY when people are panicking, SELL when people are euphoric.

You are right on target Carl!
It has worked for me if you have a good vision of which company/index you want to buy.



one of GOD's servants

Anonymous said...

The current bearishness that exists is a function of the current breakdown of the financial system and credit markets. If this is "bullish" then all out nuclear war would be a financial godsend? Uh, OK.

Anonymous said...

Why does the comment section of every blog have to turn in to an idiot fest? How about constructive critizism for a change?
Anyways, this market is going higher, it's now just a question of where do you start the buying. I'm waiting for around DOW 13,200

BH_Trade said...

Anon 12:14

You are missing the point. Markets bottom on bad news after the masses get bearish. The credit woe story was getting pretty long in the tooth and the market had been pounded 10%+ within a month. The Dow Theory sell signal may have been the bearish icing on the cake, then up we went after everyone had sold.

In my opinion it would take new and unexpected bearish news to take out the August lows. Both the Aug lows and the recent retest were created by the same news

Anonymous said...

of course we are moving a lot higher but so far without any position from Carl. Sorry that you missed out on such an explosive move over the last 3 days. Dow 14500 by may 2008

Anonymous said...

Anon,
The financial and credit markets are really busted down I see.

Or is this just your perception, as you are led by the nose, by the market gurus, who couldn't tell you what the next tick will be in the ES if their life depended on it.

Ponder that please.

Thanks,
Charles

Carl Futia said...

"of course we are moving a lot higher but so far without any position from Carl. Sorry that you missed out on such an explosive move over the last 3 days"

Thank your for your sympathy. No doubt you not only caught this move at the 1406 e-mini low but caught every other swing within a few points of its extreme for the past 5 years. Congratulations!!!

Please post you trades in real time so that I may learn from you.

Nandu said...

Bought PSPT, EEFT and ITG .

Fundamentally strong with good technicals.

cstradingman said...

Why only show the bull market on this chart? I bet bearishness has met these extreme levels at many intermediate term bottoms all along the bear market from 2000 to 2002. Am I right?

Carl Futia said...

Cstradingman:

You are correct. But each of those lows in the bear market was well below the last low. This low is actually above the previous low. This makes all the difference.