I just read an interesting article which you can find here. Notice the strong disbelief that Americans still have regarding the economy. It's understandable mind you given the shell shock of last year's collapse and the fact that the lagging indicator of unemployment is still high which is how American's judge the economy. But whenever you see the behavior of the stock market and public's perception of the economy diverge so much like it has been in the past 9 months it sends such a powerful confirmation of the trend that's in place. The stock market is a leading indicator and public opinion is a lagging one. This is when contrarianism works best....when you see strong signs of doubt/skepticism towards the trend that's in place - a signal that the trend has a long ways to go still. There's no shortage of doubt/skepticism and anyone who says otherwise is a liar. If you think this article is just a one-off then you may want to look at well known consumer confidence indicators such as the University of Michigan Consumer Confidence Index and you will see how they remain near multi-decade lows.
Skepticism/pessimism is the fuel for bull markets. Bull markets advance by converting former skeptics to believers (whether by choice or by force in the case of shorts who cover) and there's a grand canyon sized number of skeptics out there that can fuel this market to all time highs one day...you heard me....all time highs.
This is why LT I remain quite bullish. ST I continue to be remain neutral given the status of the indicators although the bears are showing some life here and a downside break of this range wouldn't suprise me. Either way, I'm just a spectator.
"The poll found only 15% believe the economy is starting to recover from the problems it faced in the past year or so, down from 17% who saw improvement in the previous poll in September. And it found 39% believe the economy is still in a downturn and conditions are continuing to worsen, up from 36% who believed things were getting worse in September."
ReplyDeleteThat's thick wall of worry right there. General public is too attached to lagging indicators and is missing the big picture. ISM, jobless claim, home sales all are showing huge improvement. History always repeat itself. Those same guys who are bearish now will turn bull someday by then we probably will have a real sizable correction.
Took some profits on the airline stocks today. Man they had one hell of a run lately all thanks to lower crude oil and MS upgrading the whole sectors.
ReplyDeleteSometime you just have to take chips off the table even though you are bullish on the LT outlook.
Add corporate insiders to this...I just looked at insider purchases vs. insider sales, sales outweigh purchases 42-to-1.
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