Sentiment Data Shows This Dip Is a Buying Opportunity

The historic data tells an interesting story. Consumer sentiment rises from lows during the late stage of a recession. As the economy emerges from the recession, it is not unusual for sentiment to dip - it usually does.

I think this is fairly logical. As the recession enters its late stage, leading economic indicators start looking upwards. As this occurs, the market rises and so does hope and sentiment. But hope lifts sentiment only so long. Unemployment is a lagging indicator and it rises past the end of a recession; as the rise continues, sentiment must be expected to decline, following its rise on hope. The fall in sentiment last week could well indicate that we have emerged from the recession. Sentiment should turn up after ISM starts rising and monthly moving average for initial claims stops rising.

I view the dip as a final buying opportunity. There may well be better buying opportunities in future economic cycles, but for the present cycle, I think this is it for those who did not buy earlier!

Comments

[Larry House:]

Too little data to justify conclusion. Fundamentals trump sentiment. The sentiment is currently that 57% of Americans do not think the current stimulus package is working. Sentiment does not get around the consumer retraction in spending.

Aug 17 11:35 AM

[j-dub:]

Hmmmmmmm..........
Reality shows it isn't.

Aug 17 11:40 AM

[WhoisJohnGalt:]

Who says we're at the end of the recession?

Aug 17 11:41 AM

[mtt04:]

Dip? This ain't no dip boy!

The elites have suckered you all back in and now they'll bring on leg 3.

The suckers are toast. S&P to 400. Did last year not teach guys anything. You 40 year olds and under have no clue what you are talking about.

Learn from the 80 year olds or be broke in a tent - your choice.

Aug 17 12:11 PM

[Afamiii:]

History shows that the no other stimulus package has been successful.

The argument being bandied about in 08 that this would be the exception because it is bigger and being applied faster has always been suspect.

The argument that will come up soon: Let have another one will be even more suspect.

I for one will be surprised if a credit induced bubble (in both asset prices and the general economy) that lasted over 24 quarter will be unwound in just seven quarters.

smartinvestorafrica.com

Aug 17 12:15 PM

[Roger Knights:]

"The fall in sentiment last week could well indicate that we have emerged from the recession."

The recession has ended; the depression has begun. (Debt-driven defaults and delevering = deadly dominoes.)

Aug 17 01:28 PM

[justin_3d:]

haha, go ahead buy all you can, while i'll short all i can! This bear market rally is over, and is time to bring on the next leg!

Aug 17 03:15 PM

[whidbey:]

Another rally is very likely before we finally hit the wall. I think we pull back to Fib support at 50% or 68%, they up to new highs.

Later the wall becomes solid and infinite. I too am a bear based on the non-performance of earnings, and the improbable future of demand. Of yes, I don't trust Obama to do anything he says, so add policy uncertainty to my list of reasons to be very cash heavy.

Aug 17 06:24 PM

[prudentinve...:]

Or the next rally likely to follow this dip may be the last selling opportunity. Fundamentals just do not support current, let alone higher valuations. In the meantime, one may profit from the momentum of the "voting machine" until the market inevitably returns to being a "weighing machine".

Aug 17 07:22 PM

[JPDX:]

I'd agree with 'abort mission' There are bears out there, lots of them still. When too many are bullish for a long time, and the consumers, then we'll be going back down. There is more upside, but a small correction is needed, I'd say S&P to 900-930 range.

Aug 17 07:26 PM