No more parroting "buy the dips, buy the dips" ???
schaeffersresearch.com
The monthly close by the SPX below this longer-term moving average was not the sole driving factor for my posture change. Sentiment and fundamental factors were also heavily considered in this decision. Investor sentiment has been extremely complacent throughout this market pullback which has tempered my bullishness in recent months. In fact, I've been outright negative on the COMP and the tech sector for the past couple of months, given that the COMP had already closed below its 20-month moving average in October when it finished the month at 3370 (see my recent Market Commentary).
Allow me to address my view of the current sentiment backdrop. In a nutshell, this pullback is unlike other pullbacks we have seen in this great bull market. In other words, prior declines in the market were greeted with extreme fear, which meant that there was a huge amount of cash built up to sustain a rally when the market finally found longer-term technical support.
This pullback, however, has been greeted with complacency, suggesting that there is still the potential for more selling, as
stubborn investors who grew accustomed to "buying the pullbacks" eventually capitulate.
There is no evidence of such capitulation as of this writing. For example, Investors Intelligence reports that 55 percent of advisors are bullish, while only 29 percent are bearish. As the market declines, this bullish percentage has actually increased. During past corrective phases, pullbacks to longer-term support have been greeted by these advisors with a great deal of fear. For example, the bearish percentage actually exceeded the bullish percentage during the Asian crisis of 1998. |
