Monday, August 04, 2008

More Evidence on Sentiment


Here are two more reasons for believing that there is an historically high level of bearish sentiment in today's stock market. 

The first chart above this post comes courtesy of the New York Times and appeared in Saturday's business section column "Off the Charts" by Floyd Norris. It shows that for the first time in 20 years more than 50% of the respondents to the Conference Board consumer confidence survey expected stock prices to decline over the next 12 months.

The second chart shows the bullish and bearish percentages reported in the Investors Intelligence weekly survey of investment newsletters.  The latest reading was 50% bears, the highest bearish percentage in 14 years.

I don't believe the market averages will drop very much from here given the extreme levels of bearish sentiment we see. The next big move in the S&P will be upward to 1500 and eventually much higher than that.  

24 comments:

Anonymous said...

8 september hell of the panic in wallstreet?mmm
crash big in 6 weeks after eclipse sun 1 agoust?mmm 16 agoust eclipse moon,to began hard down?mmm

I am believe that bear is with strong and can plunge stockmarket before finally summers.

Anonymous said...

SENTIMENT ALONE DON'T MAKE THE MARKET! OK?! And your prediction is stupid, anyone can say that the market eventually will get to 1500... Oh what happen if we go into Japan style of market?!

Anonymous said...

"Do not give what is holy to dogs, and do not throw pearls before swine, lest they trample them under their feet, and turn and tear you to pieces." Matt.7-6 Good trading all ! MC

Anonymous said...

in terms of sentiment, use p/c ratio only. surveys like investor sentiment is irrelevant ...
w.z.

Anonymous said...

Has the market changed in a way that these old reliable methods no longer work? Sentiment was very bearish at the January and March lows, we did get rallies from there, but not to new highs. Instead we got a lower low in July.

Bob Brinker's timing model failed him for the first time in more than 20 years, I believe. The market dropped more than 20 percent from the October high and he failed to call it.

Maybe timing models work for a while, decades even, then the market undergoes a fundamental shift and they become no longer reliable. I don't know, just posing a hypothesis.

Also, here's a more immediate technical question: On Friday you did not like the way the market dropped several points below 1260, where you thought support lay. Today you are calling 1250 support. How is it that 1260 was support on Friday, but 1250 is support today?

Thanks for sharing your views and charts with us! Good luck with your current trade.

Greg

Edwardo said...

I think what you are missing, Carl, is that when sentiment is at these levels, and the market still can not right itself, it is indicative of a whole new set of, in this case, nasty dynamics. The market is going much, much lower before the year is out.

Anonymous said...

Did Carl say that sentiment alone makes the market? I am sure he looks at other things besides sentiment. Bearish sentiment is one piece of evidence worth looking at in conjunction with other indicators when looking for a market bottom.

As far as Carl's "1500 in the next several months" statement, it is getting kind of old.

Thanks for the sentiment charts, Carl.

Anonymous said...

carl your great I love the site ! And yes I think this is longer term good for the market 1 year +. But short term anyhting can happen . Carl from decision point is bearish and he has been right despite the chart from his site. And I remmeber Hulbert 's market "good" timers were bullish in the fall and dead wrong. I think sentiment data takes time to play out. It works well but not on a short term basis and it works differently in a bull than a bear.

TheBear said...

Carl,
I appreciate your work and post on here infrequently. I must say that your analysis on the topic is completely erroneous. Using the data you provide above, as an example, capital flows out of stocks happened for more than a decade in the 1970s. So, if the consumer is bearish, that doens't necessarily portend any imminent rally. Your data set is well too small and only covers the largest bull market in history.

Here's reality - fundamentals determine sentiment cycles and technical analysis. So, we often see long cycles where this type of data breaks. And, it is because most people fail to realize this that their work erodes over time. Excuse my remarks but your work is eroding because you fail to recognize this fact. Please take my comments constructively as your best friend is one who criticizes constructively.

Anonymous said...

Carl, you should publish your trading record so we can see how well you have down taking your own advice. It would be nice to see your trading record before your book is published.

Carl Futia said...

Hmm...


So far 9 out of 10 comments show at least short term bearishness.

Anonymous said...

You have been posting the bearish news coverage since last June and the market shaved off 20% of highs. Get a life dude.

Anonymous said...

Carl,

Despite the magazine covers (the current Economist cover is a doozy as you know), there still seems to be a significant bearish divergence between Wall St bottom-callers and the fundamentals. We have only seen the tip of the iceberg with bank failures. The bottom will happen long before the last bank failure, but it's hard to believe that we're at the bottom with the huge hump of Alt-A and prime ARM resets on the way.

Anonymous said...

Even if the market makes a bear-market rally and reached 1500 it wouldn't really count due to the weakened purchasing power of USD.

Anonymous said...

you said hmm... 9 out of 10 comments bearish. You were the best on tickersense blogger poll in 2006 now where do you stand. What did hal holbrook say in wall street... 'good things sometimes take time'. You need to get bearish short term longer term your're right. The vix vcan't sustain much more of a break south till it hits utter complanceny territory. The low vix has worked extremely well during the bear and I will go toe to toe short term with you my vix against your sentiment indicators for short term market timing any day

Carl Futia said...

hmm...

That makes 13 bearish comments out of 14 opinions.

Anonymous said...

and this will make 14/15 but you said this type of comments where you use this comments section as bearish reference and the market still tanking... so, market will go where it wants to, and sentiment itself don't make the market or else everyone will just read sentiment and trade off of it... which render it useless...

Anonymous said...

also, looking at real short term sentiment indicator $CPC and ISEE, it's not that bearish... there are still more people buying calls then puts... so market still need to go down and still need capitulate... and we are still in bear market, so stop picking bottom, unless of course, you have tons of money to burn!

Anonymous said...

I just added to my overweight LONG position. I'm now 500% long and adding on any more dips. I think we're going to SPX 1700 by end of year. All the negative BEARS on this board are going to get KILLED so please heed my warning!! The market is going to SHAKE AND BAKE the short sellers. You just watch and learn from the best.

goodluck

Maurice

Anonymous said...

carl .... you just got punk'd we are all bulls we were just kidding. Here we come 1500 S&P

Carl Futia said...

hmm...

16 bears out of 18 comments!

Burke said...

Greg said "Bob Brinker's timing model failed him for the first time in more than 20 years, I believe. The market dropped more than 20 percent from the October high and he failed to call it."

How about that call by Bob in 2001 to buy the QQQ at $80 for a bounce after it had just slid down from $100? Bad move. Next stop QQQ $20. He had the bitching about that bad call pulled of of his WEB message board. In fact he had the message board turned off and he fired his son who had been running it. I lost about $60,000 on that Brinker call. Now days I loose my money by listening to Jim Cramer.

Anonymous said...

Well I will make it 17/18.
1. I am surprised that the index is 50% bearish - surely that is a very low number. I am surprised the number is not 80 bear/20 bull.
2. You say these are the most bearish for 14 years or so - yes it is the worst housing market / credit market for 70 years - again surprised so many people are trying to fight the trend - down. Most of my friends are under water and have entered the hope department of investing and assuming it will go up again.
Returning to that old beton the wine bottles, I still see 1070 before 1470.
Regards Catherine

Tom D said...

The bears here seem to be illiterate. I wonder if that's generally true.