If there was a gauge that could measure the level of retail permabear disgust I think it would be deeply redlining right now. I can only imaging the rage and frustration they must be feeling after getting caught short in September and taking it right up the ass for 3 months. Then, just when some relief was finally arriving they take a one two combination to the solar plexus and groin
Here's a comment I found interesting from the host of a popular bear blog which reflects the disgust that I'm noticing from bears
"Let me preface this by saying that my bear mojo has been almost completely drained from my veins at this point. The best positions I have are all long ones, and after 20+ months of hearing (and repeating) Why The Drop Is Going To Start Now, I'm getting close to just focusing on the long side. Call it capitulation if you like; I think I'm past caring."
First of all, there's no chance this joker will ever be able to just focus on the long like he says. Like I said before many times, permabears can't exclusively play the long side because they have paper thin conviction on the long side. They don't believe in the bull market and all it will take is a 2-3% dip in the market for them to start permabearing again. It's like a crack addiction. I've heard this same joker make similar comments a few times before since 2009 and every single time he ends up getting burned with shorts.
Check out this funny tongue in cheek video from someone who is probably a frustrated permabear who got crushed
Now, you might be thinking that if the bears are throwing in the towel like this it must means the market is due for a sell off. I would agree this is true but I wouldn't go too far with this. When the bull market peaks for good you probably won't hear so much anger from bears..... instead, you will hear nothing. They will have been extinct, wiped out, gonzo just like the bulls who got crushed in the tech wreck of 2000-2002 and in 2008 and early 2009. And the bears like the guy who made that video don't truley believe in the bull market. They just think it's a government inflated ponzi scheme. I gotta tell you, it's amazing to have witnessed the typical retail schmuck go from a stubborn, in denial permabulls in 2000 and 2001 to stubborn, in denial permabears since 2009 getting burned both times.
So now what? Well, look. The market no longer has the wall of worry type sentiment support it had in September and October like I was noting then. Since early November I have seen greed creep in. We have favorable seasonality now which could keep this market afloat until the end of the year but it's going to be tough for the market to make sustantial new highs given the poor sentiment backdrop. Should you short it? Like I said a couple days ago, you can be my guest but I will pass. I have a rule to never go short in a bull market no matter how tempting unless its to hedge longs.I prefer to go to cash if I feel bearish/cautious in the ST. I still have some longs but it's only about a 34% position of my overall portfolio and these positions have been very non-correlated with the market and they are core long term holds which I am a strong holder of. The only time I would consider a stand alone speculative short position in a bull market to capitialize on a correction is if all the main indicator I use in addition to my intuitive gut feel is overwealmingly bearish. In that case the risk/reward would be so heavily skewed that I would be willing to make an exception to my rule. With bullish seasonality in play and the market just a stone's throw away from new YTD highs, despite poor sentiment back drop, it's not enough to warrant a short position for a trade under my rules...it only warrents raising cash. Keep in mind my holding period for ST trades are multi-week not 1-3 days. If the market manages to keep afloat until January, then the risk-reward for a bear trade would likely be worth it under my rules and I would pull the trigger.
I am still willing to pull the trigger on some stocks that I'm eying but I admit that I am nervous doing so given my market outlook. Also, I don't want to do anything stupid because I get paid by my clients on annual performance and so far it's been a good year and with 1 month to go I've locked it in to a significant degree and I don't want to see last minute shrinkage on pay day,
The media is also running this headline lately about insiders of large S&P500 companies are selling stocks at record pace. I don't know what is your thought on this matter. But, they did the same thing back in May of 2009 I remember very clearly. There was a Bloomberg article where the CEO guy of NYSE came out and said that big boys who supposedly know their companies much better than guys like me are all bailing the ship faster than you can imagine, which it sort of saying it was pretty much a dead cat bounce from the March low. I fell for it that time and did not hold onto my winners. That's why I am pretty skeptical of it this time that it would market killer.
ReplyDeleteAnd yes I have been selling into the market strength piece by piece. Can not be too greedy or perpetual about anything.
Insider activity hasn't been all that useful and I don't look at it as an indicator of LT tops and bottoms. At best, it's a ST market timing tool. All these guys tend to do is buy on dips and sell into strength and often times they are early in doing so. When the market peaked in 2007 insiders bought heavily on the first dip. In mid August 2007 for example insider buying hit a 15 year high. What did that mean? Jack shit aside from a ST bottom. I remember also insiders loading up big time on financials in March of 2008. Again, it was near a ST bottom but nowhere close to the final low. This heavy insider buying activity kept bears at bay and bulls hopeful and then what did they do? Sell heavy in May of 2009 like you said. Wrong again.
ReplyDeleteThere's a lot of things out there that will try to shake you off from riding the primary trend to it's fullest and insider activity is one of them. But, it can be effective as a ST indicator....sometimes. It's not one of my primary ST indicators.