Loading ...AAII Sentiment Results: Pessimism Persists, Opportunity Abounds…
Albeit modest, bulls are slowly coming out of the bunkers (up to 26.64% this week compared to 23.18% last week). Bears have come down a bit as well (from 44.85% to 39.72%). This suggests some thawing is taking place – similar to the looks off of the bottom in June and December (see featured chart of bullish sentiment relative to the S&P 500 above).
Any positive spark would cause a stampede back into markets given the underweight positioning to equities, short covering and career risk of missing a move back to new highs. That said, nothing is ever a guarantee – simply a probabilistic advantage that you calculate and manage the risk as you take up exposure.
Offering further support is that there is still extreme fear showing up in the CNN Fear & Greed index – which is pinned at 25 [a range historically associated with contrarian reversals to the upside – particularly on secondary versus primary pullbacks (like what we are having now)].
Many of our other indicators are confirming the viewpoint that it pays to be getting some long exposure when pessimism is in this range.
Is it possible that Powell’s speech on Friday will be the spark that ignites a rally? If you charted his last 10 or so appearances they would point to a contra-indication (i.e. sell when he speaks). Friday is his opportunity to change the trend. So far the market is not betting on it, but the indicators continue to favor a reversal.