Sentiment Gauges Bullish, And Here’s What That Means


AT THE OUTSET, I just wanted  to say that my prayers go
out to all the loved ones of the astronauts who perished in this weekend’s
dreadful accident.

Longer-term nothing has changed. I still believe we are in a secular bear market
for stocks. I have been saying this for many moons, and the market has acted
accordingly…but  no one wants to believe it. I don’t know what else the market
needs to do to convince the masses of the type of market we are in. You would
think that after a 50% drop in the S&P and over an 80% drop in the Nasdaq 100,
someone would get a clue. Why am I saying all this? It is because most of my
sentiment gauges, longer-term, continue to be too bullish. Yes, the wrong-way
crowd is stubborn. Until sentiment gets much more bearish,  I would not expect
great rallies…more or less, ,just bounces.

Other reasons for my longer-term stance:

  • World markets are
    still in awful shape. In fact, the London FTSE is now below October’s lows.
  • All major indices
    are still trading below their 200-day averages and just recently breaking
    below their 50-day averages.
  • Most all sectors
    remain in downtrends.
  • Only a small
    percentage of stocks are now trading above their 50-day average.

  • FINANCIALS and
    BROKERS
    , which are a proxy for the market…very simply, are a
    mess.
  • On the
    intermediate-term front, when the Dow and S&P broke support recently, it went
    negative. Until those major indices can get back above those levels, stay
    cautious.

Shorter-term, there
is a bit of good news and a bit of bad news. The good news is that it feels like
the NYSE-type stocks have had enough of going down. I suspect more of a bounce
is in order. How far and how long is anybody’s guess, but I don’t expect too
much. These bounces occur not out of strength, but out of oversold weakness.
They should  be used for selling or added shorting…nothing more. On the bad
side is the Nasdaq. On Friday, even though the Nasdaq reversed a bit, it felt
like it was being pulled up by the rest of the market. I would suggest that any
weakness in the NYSE would cause a final break of support in the Nasdaq (which
is right here at 1320).

No matter what, continue to go slow. About the only groups worth mentioning on
the positive side are GOLD and a sprinkling
of lower-priced names in INTERNET,
WIRELESS and other speculative areas that I
have talked about in the past few weeks…and oversold or not, if the Dow and
S&P break below Friday’s low on a closing basis, see ya down at the October
lows. The Nasdaq will surely go along for the ride.