Seeking Alpha

Mark Gomes'  Instablog

Mark Gomes
Send Message
Mark Gomes is one of the world's most experienced technology analysts, with over 20 years in the market. He is also a Masters Track & Field world record holder and U.S. Gold medalist (http://www.fasterthanforty.com/hello-world/). Currently, Mr. Gomes is the CEO of PTTResearch.com, Pipeline... More
My company:
PTT Research & Pipeline Data, LLC
My blog:
Poised To Triple
My book:
Faster Than Forty
  • Stock Market Yellow Alert! 10 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, OTCQB:GSAT, PXLW, OTCQB:TPCS.

    Stocks: ATTU, GLUU, GSAT, PXLW, TPCS
Back To Mark Gomes' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (10)
Track new comments
  • Author’s reply » More info will be provided to PTT Newsletter subscribers in the coming days / weeks. Cheers. http://bit.ly/16GHjpw
    27 Nov 2013, 12:07 PM Reply Like
  • 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
  • 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
  • Great article, pullback must happen sooner than later
    27 Nov 2013, 05:46 PM Reply Like
  • Mark,

     

    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!

     

    Cheers,
    Jason
    2 Dec 2013, 06:18 PM Reply Like
  • Author’s reply » Many Thanks, Jason!
    4 Dec 2013, 06:06 PM Reply Like
  • Author’s reply » Wow indeed. http://bit.ly/1aZT2x0
    12 Dec 2013, 03:24 PM Reply Like
  • Mark,
    what is this chart telling us (in your opinion)?
    thx in advance
    12 Dec 2013, 03:28 PM Reply Like
  • Author’s reply » That the market is overextended.
    12 Dec 2013, 03:43 PM Reply Like
  • With a 3 month range of -12 to +8 you will almost certainly be correct.
    12 Dec 2013, 03:59 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.