Investor Sentiment Does not Support Stock Market Crash Outlook

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Investor Sentiment

Updated March 2020 

Investor Sentiment Does Not Support Market Crash Outlook

While, the action has been restricted to the upside, the same cannot be said for sentiment readings. For the past four weeks, the moves have been wild, and this trend appears to be gaining traction.  The number of bulls this week surged to 47%, and the number of neutrals and Bears experienced a sharp drop. Additionally, there was a sharp move in our anxiety gauge. Market Update Nov 2, 2017

Despite, all the tall tales experts like Marc Faber love to tell,  in reference to the coming stock market crash, there is no evidence to support these silly assertions. One of the most important indicators of a market putting in a long-term is investor sentiment.  The Crowd is far from Euphoric so the markets are not going to crash. A correction though is a strong possibility as the markets are extremely overbought.  Hence, if the markets let out some steam don’t panic but view sharp pullbacks as bullish developments as it allows the markets to let out a well-deserved dose of steam.

Investor Sentiment Not supportive of a stock market crash

The market has not let out a decent dose of steam for some time, but when a market is trading in the overbought ranges, it is generally prudent to wait for the market to let out a decent dose of steam before opening long positions in the major indices. The other option is to establish positions in stocks that are trading in the oversold to extremely oversold rangesMarket Update Nov 2, 2017

That is what we told our subscribers back in November and those views still hold. While the markets are overbought, investor sentiment is trading in the oversold ranges.  Most Investors have not embraced this bull market and until they do, it will not crash. Therefore all strong pullbacks should be viewed through a bullish lens.

Compile a list of stocks you would love to own at a discount. When the market’s pullback jump in and buy them.  Alternatively, you can look for strong stocks that have  pulled back and deploy 50% of your capital into them

Conclusion

Investor sentiment has a long way to travel before it hits the Euphoric zone so don’t listen to the naysayers that love to create a mountain out of a molehill. These charlatans take delight in conning the masses that the markets are ready to crash the moment they start to let out a bit of steam.

As the markets are extremely overbought, investors should not be surprised if they do let out some steam. At this point, it would be better if they did shed a large dose of steam.  Now if this scenario comes to pass, then use it to open up positions in strong companies.

A broken record repeating the same thing over and over again

Maybe one day he will get it right and hopefully by then his followers are not completely broke.

Stock market Update Oct 2019

Now once again you get to see in real-time that the best time to buy stocks is when the masses are panicking. It is in such moments that the astute investors find real bargains. One needs to be patient for these opportunities and more importantly act when they present themselves. The last time this occurred was during Oct 2018 to Jan 2019 period.  However, (as usual), most investors will panic and fee for the hills, when less than two weeks ago, they were begging for a chance to get into the very stocks they are now running from.

 

Nothing changes and that is why the masses are destined to lose. If you examine every single bubble in history, the storyline is the same. If you are a new subscriber, this is the most important lesson you need to grasp. This is mass psychology in action; never follow the masses unless you are looking for a quick end. Investor sentiment is still a long way from hitting the zone of euphoria and until it does all strong pullbacks have to be embraced.

The markets are volatile (Sept to Oct period) and the crowd tends to overreact to the news. Remember, every disaster becomes a disaster because the masses were conned into believing a false narrative. You say no way; well then how come reacting to disasters pays so poorly.  The stock market is the best barometer for the disaster-prone. If disasters paid off well, then the Dow should be closer to zero than 27K.

Stock Market Crash outlook 2020

Huge amounts of liquidity are already being added to this market, but you have seen nothing yet. Helicopter money is about to become a reality and regardless of the mantra it’s different this time, nobody can fight a fed that is determined to unleash the mother of bailout packages

It appears that markets are experiencing the “backbreaking correction” one which every bull market experiences at least once and is often mistaken for the end of the bull.  In today’s manipulated markets, one cannot tell which correction will morph into the backbreaking correction, as free-market forces have almost been eliminated from today’s markets.  While it feels like the end of the world, such corrections always end with a massive reversal.  Given the current overreaction to the coronavirus, there is now a 70% probability that when the Dow bottoms and reverses course; it could tack on 2200 to 3600 points within ten days. Interim update March 9, 2020

Buying Opportunity of a lifetime?

Based on our indicators the markets were expected to let out some steam, but mass hysteria turned a normal correction into a bloodbath in the short term timelines and a generational buying opportunity when viewed from a long term perspective.

Typically, the markets would pullback sharply then tread water until our indicators moved into the extremely oversold ranges. If the sentiment is still trading in the maddens zone when our technical indicators hit the extremely oversold ranges, there is a 90% chance; it will trigger the father of all buy signals.

There is one massive indicator validating the outlook that this current makes for a great opportunity. It’s insider activity, and the readings on this indicator are off the charts.

Insiders have been using this massive pullback to purchase shares, and one way to measure the intensity of their buying is to check the sell to buy ratio. Any reading  2.00 is considered normal, and below 0.90 is considered as exceptionally bullish. So what do you think the current ratio is; well, it’s at a mind-numbing 0.35, which means these guys are backing up the truck and purchasing shares.

So what are the readings today? Based on very heavy transaction volume, Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, and the Total one-week reading is 0.35. Insiders are not just buying shares, they are devouring shares. Insiders behaved in a similar fashion in late-December 2018, after stocks crashed on Christmas Eve; in early 2016 when stocks also corrected; and in late 2008/early 2009, at the depths of the Great Recession correction. Those were spectacular times to buy stocks. Insiders seem to be telling us that today offers a similar opportunity.  https://yhoo.it/2TV0cE2

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