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BNP's "Love-Panic Index" signals a correction ahead as it crossed into "love" territory a few...

BNP's "Love-Panic Index" signals a correction ahead as it crossed into "love" territory a few weeks back. Past experience says to brace for an average 12% decline in the S&P (SPY) over the next 6 months. The biggest drivers of the recent move into "love" have been State Street's Investor Confidence, the CFTC's COT report, falling short interest, rising Nasdaq to NYSE trading volume, and small caps (IWM) outperformance over large caps (IWB).
Comments (14)
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    When they're Yellin' you should be Sellin'
    When they're Cryin' you should be Buyin'
    What goes up Must come back Down
    Don't be the last Bus out of Town
    --The AlphaKing song on youtube
    4 Jun 2013, 10:59 AM Reply Like
  • TF Wright
    , contributor
    Comments (51) | Send Message
     
    Words to live by, Joe. Beware the cheerleaders.
    4 Jun 2013, 11:07 AM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    Here is the link, see if SA allows it
    http://bit.ly/118Pvay

     

    And the link to AK, SA blog with 6 months trial to newsletter with daily analysis, trades:
    http://bit.ly/WpVqYk

     

    Insert any cliche you like, don't fight fed, trees don't grow to the sky, pick any.
    4 Jun 2013, 11:29 AM Reply Like
  • baseballman24
    , contributor
    Comments (300) | Send Message
     
    They said this 2000 pts ago, 1000 pts ago and now! mean while it grinds higher, they also say "don't fight the Fed"
    4 Jun 2013, 11:11 AM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    John leads off with a provocative fact: "… the last two 50% market declines – both the 2001-2002 plunge and the 2008-2009 plunge – occurred in environments of aggressive, persistent Federal Reserve easing." Go figure, right? And to make the situation even more counterintuitive and confusing,

     

    … the maximum drawdown of the S&P 500, confined to periods of favorable monetary conditions since 1940, would have been a 55% loss. This compares with a 33% loss during unfavorable monetary conditions. This is worth repeating – favorable monetary conditions were associated with far deeper drawdowns.

     

    So what gives? Hussman explains:

     

    Part of the reason that monetary policy was so ineffective during 2001-2002 and 2008-2009 is that these market collapses were preceded by overvalued, overbought, overbullish euphoria, and then gave way to economic downturns. Though monetary policy certainly fed the preceding bubbles, monetary policy did not prevent or halt those recessions, and those recessions were not broadly recognized until stocks had already lost about 30% of their value.

     

    Take heed!
    4 Jun 2013, 09:59 PM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    Fed can't prop 'em up forever, and reducing QE is already on the table, should happen soon, within a few months. Transparent Ben.
    And just because market ran farther than most speculated does not mean it won't correct now. The higher market goes, the higher the risk of buying & owning it.
    4 Jun 2013, 11:27 AM Reply Like
  • Topcat
    , contributor
    Comments (412) | Send Message
     
    No risk, just set your STOPs, and hedge as appropriate. However, 401k funds, with no real cash option, watch out below.
    4 Jun 2013, 12:11 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    Weren't these CHIMPS speaking of the Hindenburg Omen in 2010 as well ???

     

    The S&P 500 was 1150 then .... Einsteins
    4 Jun 2013, 11:36 AM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    Hindenburg omen has a spotty track record. I think market has one final rally push coming before decent decline. Dips are normal.
    4 Jun 2013, 11:40 AM Reply Like
  • financial wiz
    , contributor
    Comments (18) | Send Message
     
    Dips are normal, but when and how much is the question. Someone once said if you're correct but way too early, its the same as being wrong.
    4 Jun 2013, 01:34 PM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    I find no value in trying to predict size and duration of decline; wiser to re-evaluate daily or at least weekly, then decide best odds. I trade IWM a little, the only market trading I ever do.
    4 Jun 2013, 01:57 PM Reply Like
  • baseballman24
    , contributor
    Comments (300) | Send Message
     
    Everytime we get a pull back which is good for stocks, the doom and gloomers come out.
    4 Jun 2013, 02:24 PM Reply Like
  • Joe2922
    , contributor
    Comments (406) | Send Message
     
    And every time there is a rally, the cheerleaders and long-only money managers come out in droves.
    4 Jun 2013, 02:43 PM Reply Like
  • FrankEllis
    , contributor
    Comments (190) | Send Message
     
    Foreign language. I have no idea what is meant by "love index," is not a part of my investment vocabulary.
    Past experience is not enclosed in a time of beginning and ending dates, so I have no idea which past you are discussing. The 13 past years which formed a side ways market included drops of 60% and 40%, so the 12% doesn't fit in that past.
    The past I see is an S&P of 19 in 1950, a 13 year side ways market from 2000 to 2013, in which 1550 was the ceiling, and a past of the recent break out above the resistance into a no resistance, zero resistance, wide open, no limit upward cycle like the past ones that launched out of past side ways markets of 16, 20, and more years.

     

    The present record amounts of sideline cash, not the Fed, will determine what is to come, but the breakout has already occurred, making 1550 the support instead of the resistance. Its all a bumpy ride, but the break out makes a ten fold increase in the next 13 to 16 years far more likely than a 12% drop.
    Volatility is bashing investors who have narrowed focus on a short term past. Investors who see the breakout above the 13 year side ways resistance, who see the S&P has distinct side cycles followed by up cycles, who see that 1550 divided by 19 is an 81 fold increase over 50 years, or 63 yrs if you prefer, these investors are accumulating at the bargain basement foundation of the coming upward cycle.
    We can get out of growth back into dividends after the upward cycle ends with your 12% correction, most likely on its way to a 50 or 60% correction, before returning to the same ceiling and dropping again. A look at the past 65 years or 80 yrs of S&P gives a good indication of things to come. Not the date. Not precise timing. But the long bull that follows every long side ways movement.
    Having hit 1550 the third time, and broken through, the bond market and interest sensitive holdings have sold off, increasing their yield, because the smart money is flowing into stocks to form the support level for the coming 13 to 16 year upward leg.
    The bears are fighting the bulls, but the future belongs to the bulls, just as after the prolonged run up, the side ways market will belong to the bears until they get their 50% correction and the bulls assert pressure back to the ceiling.

     

    Long SDYL, SPXL, TNA, and TQQQ.
    4 Jun 2013, 03:45 PM Reply Like
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