Fool Me Thrice

Yesterday’s WSJ ran a piece titled, Investors’ Sell Signal:  Surging U.S. Stocks that demonstrated the continued negative sentiment towards equities and dilemma faced by those who capitulated last year.

Jory Olsen:  “I remind myself of how bad it felt in March 2009,” he said, referring to the crisis-era low. “I just didn’t sleep because it was horrible. Now, we’re on the other side of that swing and this could just as easily go down as it could go up.”

Although the S&P 500 has returned 103% since bottoming in March 2009, it has suffered setbacks along the way, most recently as European leaders struggled to find a solution to the Greek debt crisis. That has caused individual investors to meet this year’s rise with skepticism, some observers said.

EPFR hasn’t tracked a single week in which individual investors put money into U.S. stocks since last July. And since the market bottomed in March 2009, EPFR has counted just two months of net inflows from individual investors. Institutional investors, on the other hand, are buying. Including all types of investors, U.S. stock funds have seen inflows of more than $588 million this year, according to EPFR.

and confirmation bias for those who got long:

To be sure, positive economic data have bolstered some investors’ hopes for a sustained rally. The Conference Board on Tuesday reported U.S. consumer confidence in February reached its highest level in a year.

This week, the American Association of Individual Investors’ sentiment survey reported that 44.5% of investors think the market will rise in the next six months, slightly higher than its long-term average.

That’s pretty remarkable and begs the question.  Is this rally to new highs a continued short squeeze (short outright and v benchmark) or is real new money being put to work?  We don’t deny that markets can continue higher with skeptics remaining short exposure but we believe in order to have a sustained bull market trend that breaks through previous crisis level resistance (like our 1370/1375 $SPX) we will need to see fresh real money come off the sidelines and out of fixed income.


About exantefactor

capital market veteran of over 15 years covering multiple asset classes. Focused on analyzying markets ex ante (before the event).
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