Monday, March 09, 2009

Record Bearishness


Here are two more pieces of evidence for the truly bleak outlook most individual investors hold for today's stock market. The first is the latest reading of the American Association of Individual Investors weekly poll. A record 70% of those responding were bearish about the market. The chart above (courtesy of Stockcharts.com) shows the last 20 years of poll results and the blue arrow points to the latest week's reading.

Above the sentiment chart you will see the cover from the March 9 issue of Time Magazine (I almost missed this - Thanks to Paul Montogomery, the inventor of the magazine cover indicator, for bringing it to my attention!). This is just one more indication that the public is very bearish on this market. It is especially significant when coupled with the New York Times and Chicago Tribune headlines I pointed out last week here and here. Over the past year this combination of indications has been followed almost immediately by 200 point rallies in the S&P. I think the current situation will be no exception.

7 comments:

Anonymous said...

I have respectfully disagreed with your faith in front page articles being bearish meant we had to go up. But with sentiment as bad as it is and the front pages being so bearish (and yes they usually are wrong just not always) I think you are correct.

The question is do we get a 3 week 15% rally or a 3 month 50% rally from here?

Balsamo said...

Well, as far as i can remember...we had a lot of such covers in 2008 and only ONE 200 point rally on the SP...from the november lows...statistically, it's a bit weak, isn't it ?

I wonder how the covers of 1930-31 did look like ???

Carl Futia said...

Balsamo:

Let's see if I can refresh your memory.

Jan-March 2008 lows 1255 to May highs 1441 = 186 point rally. July low to August high = 115 point rally, September 18 low to September 19 high = 154 point rally, October 10 low to October 14 high= 230 point rally, November 21 low to January 6, 2009 high = 202 point rally.

Laurence said...

The Vix, a much more reliable indicator of sentiment, as compared to previous bottoms reached into the 80's and above, currently it is in the low 50's. No capitulation yet.

Anonymous said...

How about looking at this weeks Barrons cover. Not bearish.

Balsamo said...

Ok, i missed the one day pop of october 13...in the worst month ever...so that makes 2 "200" points rally, 3 if we include the 186 points one...for how many dramatic covers ?

Anyway, don't get me wrong...I AGREE we should have a rally, actually we should already have had one...It's becoming ridiculous..they are pricing the end of the world by year's end...

But we are in uncharted times, none of us have ever experienced this kind of markets...nor did the journalists...

with respect

slip5ham said...

Every time a market reaches an unrealistic high or low, everybody rushes out to explain why it is different this time. Information Technology was changing business during the .com boom, oil demand would permanently outstrip production in 2008, and now this is a depression like none seen before. Those people that leaned too far in that direction were hurt, and this time will be no different. As soon as everybody is convinced that this is a one-sided trade, the market will correct them severely.