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Posts Tagged ‘market sentiment’

Market Warning Signs

Posted by Larry Doyle on January 24th, 2014 9:58 AM |

When everybody is on one side of a ship that vessel will tend to list and often has a hard time continuing to move in the same direction.

This navigating analogy is used very often on Wall Street and strikes me as very applicable a mere three weeks into trading for calendar 2014. Let’s get more specific in terms of what exactly I mean.

Sentiment indicators on Wall Street are defined as,

A graphical or numerical indicator designed to show how a group feels about the market, business environment or other factor. Sentiment indicators can be used by investors to see how optimistic or pessimistic people are to current market conditions. (more…)

“Nobody Has Ever Seen This Market”

Posted by Larry Doyle on November 12th, 2009 8:22 AM |

“I’ve seen this market before” is a very commonly used phrase by Wall Street professionals to compare and contrast different periods.

For example, when the Treasury yield curve is steepening or flattening, many market pros will project what will happen in different segments of the market based on discounting cash flows under the steepening or flattening scenario. Similarly, when credit spreads are in a widening or tightening trend, market pros will project how higher or lower rated investments will typically behave.

These projections are all based upon prior experience. The pros are utilizing a combination of market fundamentals along with investor sentiment to make forecasts. They will overlay their current forecasts against similar trends during prior cycles. Not that markets are ever perfectly symmetrical, but ‘having seen a market before’ is often a strong indicator of current and future price action.

Against this backdrop and given the challenging nature of the current market price action, I would challenge any market analyst or pundit who would utilize a similar approach today.

The simple fact is, ‘nobody has ever seen this market before.’ Why? Because this market has never transpired previously. Certainly, we have seen bull markets. We have seen low interest rate markets. We have seen accomodative Fed policy. We have seen bubbles. All that said, we have never seen a market in which global cross currents combined with ongoing fiscal stimulus have impacted markets to this extent.

In fact, I think one could make the case that the market is doing better as large parts of our domestic economy and the global economy are actually doing worse. While traditional schools of thought would view that correlation as perverse, the economic strains are compelling global governments to keep stimulus programs in place.

What is the result? A rallying market with increasing potential that the market develops into a blowoff. The irrationally positive nature of a blowoff is akin to a wholesale dumping of securities in a selloff.

Keep your head and stick to disciplined investing. Respect the price action, but do not get overly enamored with those analysts telling you what will happen . . . because ‘nobody has ever seen this market.’


Market Sentiment Very Balanced

Posted by Larry Doyle on April 23rd, 2009 2:06 PM |

Our Economic All-Star Laszlo Birinyi has recently had some very good calls on the market.  His funds are outperforming the major stock market averages by 10-15%. Birinyi is an excellent stock picker but also has an experienced professional’s “feel” for the market.

His weekly Blogger Sentiment Poll provides us an easy snapshot as to current investor attitudes. Recall that when a bullish reading approaches 30%, it is an indication of the market being oversold. Similarly, if a bullish reading approaches 70% it is an indication of the market being overbought.


The market overall has done somewhat better over the last few weeks but has given some of that improvement back in this week’s trading. In investment terms, this price action is known as “running in place,” “range trading,” or “moving sideways.”  

Not surprisingly, the readings in Birinyi’s polls indicate a very balanced short term sentiment. 


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