Arial, Market Vane specializes in futures trading advisors. the AAII reading is as far as i know the second highest reading of bulls EVER. the highest was in January this year at 75%. this is probably significant, as the AAII members surveyed in this poll have traditionally been a very conservative and skeptical crowd. this year we have had already three record high readings of AAII bulls. let me add that the significance of this is not regarding the short, but the medium to long term. to me it indicates that the big secular bull trend may be near completion, or has perhaps ended already. it is normal for bull markets to end in a wild burst of unbridled optimism.
note the massive inflows into mutual funds this year, which also underscore this mindset. both advisors surveyed by Investors Intelligence and individual investors surveyed by AAII have been a lot more bullish over the last year than they were when the Dow was trading between 3 and 4K. not to mention the beginning of the secular upswing, whether you date it back to '74 or '82. both periods were accompanied by deep pessimism, exactly the opposite of today.
interestingly the broad market has basically made no progress over the past year during which the bullish consensus has been so high. it hasn't collapsed either, but the major indices are more or less where they were a year ago, the speculative sectors excepted.
it is also remarkable that the big fund inflows have failed to push the market higher. obviously the issuance of IPO's, secondaries and insider selling have been even greater than the inflows.
i think that the last linchpin holding this thing together is the dollar. US corporations have borrowed over 300 billion Euros over the past year and a good chunk of this money is being used for buybacks. it is a form of the carry trade. once the Euro carry trade blows up, it's Kathy bar the door....
alternatively the Euro could become the focus of a currency crisis that ends with it's break-up. if that should happen, i'd expect the D-Mark to immediately soar by 15-20%, which would also represent a major dislocation. it will be interesting to see how the Euro situation gets resolved, and i'm convinced it's resolution is of utmost importance to the bubble in the world's stock markets.
regards,
hb |
