The current negative mood is unanimously created and endorsed by the majority of the market editors. We can even gauge this by our fearful clients. However, we are very encouraged by the development of higher lows in our ETF positions and other risk assets.
The lengthy sequence of higher lows for most risk assets and cyclical ETFs is a negative sign to flock traders. The reason is that to these folks it seems like multiple failed rallies. The crowd is getting ready for a severe bear market. They are positioning themselves into US Treasuries such as TLT, TIP as well as high dividend defensive equities. Keep in mind they are all forming lower highs, a bearish sign.
Take note however, that a small group of seasoned and savvy traders often see this as a bullish sign and they may add to existing positions. Since we bought at low prices during the spring time we are ready for anything this market hands us. Buying low into fear is the key to making consistent profit. But it takes foresight, conviction and guts.
So now these amateurs are thinking that all indicators as well as so called gurus are pointing toward a severe bear market. They are convinced that it is inevitable. There is not one single positive article in the financial news these days. Similar attitudes and media articles prevailed in the spring of 2009. We have indicated the most sensational articles published last week on MarketWatch website in the event that you wish to see the evidence for yourself.
Our conclusion: The recent flock of technical analysts, financial advisors, wealth managers, and not the least, financial media editors, turning bearish is a bullish sign for stock markets in the near future. We are ready and in position to benefit. It will be the last leg of this powerful 4 year bull market. Keep in mind that the market will have to first cause significant losses for the mass number of investors positioned in defensive stocks and fixed income, before the next major downturn which will catch everybody by surprise. And that is just the way financial markets work.
Insiders betting on a market decline. (Mark Hulbert. The problem with this commentary is that he does not distinguish that the defensive stock insiders are selling and not cyclical stock executives.)
Treasurys and dollars are your best bets now. Commentary: Stock and commodity bubbles are in trouble. (Our response is “Really? Treasuries are your best bet? At these insane prices that are higher than 2008 market crash?”).