Mark Gomes'  Instablog

Mark Gomes
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This profile, along with Mr. Gomes' investment methodology and article on "Tripling Your Money" ( are required reading to understand how Mr. Gomes' researches and trades his picks. His updates are communicated via his Seeking Alpha Instablog/Articles/Comments and... More
My company:
Pipeline Data, LLC
My blog:
The Pipeline Data Newsletter
My book:
Faster Than Forty
  • Stock Market Yellow Alert! 11 comments
    Nov 27, 2013 12:05 PM | about stocks: ATTU, GLUU, GSAT, PXLW, TPCS

    This morning, results of the latest US Investor's Intelligence Sentiment Poll were released. Bullish sentiment increases to 55.7% from 53.6%, while bearish sentiment decreased to 14.4% from 15.5%. Thus, the gap between bulls and bears (which I call "net sentiment") reached 41.3%, the highest number I have seen in a long time.

    Contrary to what you might believe, this is not good news. It's a warning flag. The chart below may seem confusing, but I'll explain…

    (click to enlarge)

    This is a scatter graph of every net-sentiment data point for as far back as I could find. I combined this data with data regarding stock market returns in the 3-months following each net-sentiment data point. The results showed an inverse correlation. In other words, the more bulls (vs. bears), the more susceptible the market has been to a decline.

    The breakeven point on this graph is 32%. In other words, when bulls outnumber bears by more than 32%, the market has typically dropped in the 3-months that followed.

    As stated above, we are currently at 41.3%. According to my graph, the most likely market return over the next three months will be -1.5%. The range, however, is wide. Under these conditions, the market could rise as much as 8% or fall as much as 12%.

    Because of the great year on the market, many portfolio managers are set to receive big bonus checks. Others are playing catch-up because they haven't kept pace. Both types have an incentive to buy stocks until the New Year. The successful ones will get bigger bonuses if stocks keep rallying, while lagging managers will buy stocks, hoping to catch up. Thus, the market could keep rising until year-end. It's a big game of chicken.

    However, considering the market's recent run, a pullback appears due sometime in the next three months. It could be now or it could be later. FYI, in addition to the information I have already provided, many of my risk/reward charts are topping out. Accordingly, I am selling most of my secondary (non-favorite) investments. I am also making sure that my remaining positions are properly sized, according to my publicly-available Methodology.

    Of course, I will maintain a position in my favorite stocks (especially the ones with positive risk/reward charts). At present, my very favorite core positions are ATTU & GLUU. My favorite speculative positions are GSAT, PXLW, TPCS, & a new pick I provided to PTT Research subscribers on Tuesday.

    Barring a market correction, I expect all of my stock to be up (after all, I believe they are all "poised to triple"). In fact, even if the market falls, these positions could rise based on business momentum. Thus, at times like these, I hold my favorite stocks and simultaneously place heavy bets against the S&P 500 and the Russell 2000.

    Be careful out there.

    Disclosure: I am long ATTU, GLUU, GSAT, PXLW, OTCQB:TPCS.

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Comments (11)
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  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » More info will be provided to PTT Newsletter subscribers in the coming days / weeks. Cheers.
    27 Nov 2013, 12:07 PM Reply Like
  • hatvani
    , contributor
    Comments (219) | Send Message
    Crazy graph. No axis labels or any indication of magnitude. I assume the pink dots are the net sentiment data. If it's a percentage according to your description, how can they be in 2 dimensions? Mark, your articles are usually pretty clear and well reasoned. Why is the pretentious chart that looks like fake rocket science? No need for that.
    27 Nov 2013, 03:12 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » Hatvani,


    I searched for my original data and charts, but couldn't find them. I committed the information to memory long ago and misplaced the hard copy. That screen shot is all I could find. In the end it wasn't worth the time or effort to search for more or recreate it. I can only donate so much free time here.


    My text describes it well enough. I can delete the chart if you wish.


    Mark G.
    28 Nov 2013, 11:29 AM Reply Like
  • Bullmarketcall
    , contributor
    Comments (2102) | Send Message
    Great article, pullback must happen sooner than later
    27 Nov 2013, 05:46 PM Reply Like
  • jbprugby
    , contributor
    Comments (2) | Send Message


    Your chart is readable, explanation good. Thank you for breaking it down in such a fashion. I also very much like your outlook on Gluu!


    2 Dec 2013, 06:18 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » Many Thanks, Jason!
    4 Dec 2013, 06:06 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » Wow indeed.
    12 Dec 2013, 03:24 PM Reply Like
  • Renmycat!
    , contributor
    Comments (931) | Send Message
    what is this chart telling us (in your opinion)?
    thx in advance
    12 Dec 2013, 03:28 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » That the market is overextended.
    12 Dec 2013, 03:43 PM Reply Like
  • vaxman
    , contributor
    Comments (13) | Send Message
    With a 3 month range of -12 to +8 you will almost certainly be correct.
    12 Dec 2013, 03:59 PM Reply Like
  • Mark Gomes
    , contributor
    Comments (3132) | Send Message
    Author’s reply » Heck of a week. In the 10-month since writing this, the Russell has fallen nearly 8%. I'll provide a videocast on hedging shortly.


    I've been providing these videocasts exclusively to our paying customers, but we're going to share one or two with the public, considering the recent market action.
    10 Oct 2014, 05:45 PM Reply Like
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