Loading ...This is a mixed read. While CNN’s Fear and Greed is at caution levels, AAII Sentiment shows plenty of room to run. We are there on F&G, however, being more conservative means “hold what you have” and potentially harvest some positions (or portions of positions) with big gains. Add selectively only in names of laggard sectors that can play catch-up into year end like Biotech (which has already had a nice move off the lows), and the Exploration and Production sub-sector that is trying to catch a bid. We wrote about the potential opportunity in both groups in recent weeks (biotech has already had a nice move, the E&P sector (XOP) is up very modestly, but could change overnight with a Phase 1 deal signature):
Well now we are here, and everyone who is still underweight equities will have to chase. The likely near term move is a mini-shakeout to rattle the new money from the last week or so that is “late to the party.” Once the weak hands are back out it is a reasonable probability that we can melt-up higher into year-end. That said, when everyone’s waiting for a pullback to buy, you might not get it…
The National Association of Active Investment Managers (NAAIM) Equity Exposure Index (Video Explanation Here) reading this week confirmed that active managers are still underweight equities (relative to bonds and cash) at just 65%. They were not positioned properly for this breakout to new highs (as we noted from the BaML Global Fund Manager Survey several weeks ago).
https://www.zerohedge.com/news/2019-10-31/three-tenors-stock-market-and-sentiment-results