The small guy investors are 40% Bulls vs 40% Bears according to AAII. With the market making new YTD after new YTD you would think that some sort of optimism would be evident....but no. Once again skepticism reigns. This is quite unbelievable. I suppose only when investors start hearing about job gains and a drop in the unemployment rate will they finally start to show some excessive bullishness. The problem with that is, the markt isn't going to wait for you to see those sorts of things... it will be signficiantly higher by then.
This doesn't change the fact that the market is maximum overbought. I suppose its possible to make new records in the OB/OS indicator I posted last night but I ain't going to bet on that. The ST risk/reward is simply poor in my opinion. However, with bonds still fairly strong and skepticism from AAII, it doesn't appear that there is significant downside even though we are extreme overbought levels (I sound like a broken record, I know, but I've been right about it).
Bottom line: not worth it to chase the long side in the market but the downside danger appears limited for now. I'm going to be focusing on my microcap stock list which so far has been doing well.
I've been following the AAII data too. I don't think we'll have a meaningfull correction until the ratio gets a lot more bullish.
ReplyDeleteSo many investors 'know' this is just a bear market rally. There's still a lot of cautious money out there. And a lot of money waiting to buy on a pullback.
These are the things that give me reason to believe the rally will go on.
yup, another way to look at the data is that if the market sees downside it should be limted.
ReplyDeleteI have never seen a major correction happen with the bull/bear ratio at 1.