Corporate insiders get even more bearish, the Vickers sales-to-buys ratio rising to 5.61:1 from 3.8:1 at the start of September. The deterioration comes from Nasdaq issues, where the ratio jumped to 6.17:1 from 2.96:1. Perspective: The long-term average is 2-2.5:1. One year ago, with stocks gasping for air, insiders weren't sellers - the ratio dropped to 1.04:1.
As stocks run higher, analysts continue to get more bearish (charts here), notes Schaeffer's Ryan Detrick, believing this bodes well for a continuation of the bull market. Pretty fair contrarian indicators, analysts remained relatively bearish throughout the entire 2002-07 bull run.
Goldman's end-of-2013 S&P 500 price target of 1,575 is a 9% gain from here, but the team envisions a bumpy ride, says John Melloy, with the index falling to 1,250 (a 14% decline) by the end of this year.
This is the first time after any of the QE, Twist, and LTRO announcements that the stock market is lower 13 trading sessions later, writes David Rosenberg. The Fed may have established a floor for prices, but the global economy has created a ceiling. Another obstacle is bullish sentiment, just the opposite of this time last year when investors were hunkered down for more pain.
Negative earnings preannouncements (4 of them for every 1 positive release) are running at such a high rate as to bring back memories of the 2000-01 tech bust to Strategas Research. The market is stuck between easy money and lousy fundamentals, says Weiss' Mike Larson.
BAML's sell-side indicator - measuring the attitudes of sell-side strategists - continues to flash a major contrarian buy signal for stocks as the Fed's QE is unable to budge the record-high bearish tilt of the group. (previous)
Stick the part from Dow Theory about the Transports and the DJIA needing to confirm each other in the same closet with your bell-bottoms, writes Jacqueline Doherty. Since the 1970s - as the U.S. has become a more service-oriented economy - the S&P 500 has gained an average 6.5% in the six months following a period (such as now) when the Transports have lagged. This handily beats the S&P's average 6-month gain of 4%.
Speculators are net long $51B in major equity index futures contracts, according to the latest CFTC data. By comparison - ahead of a major rally - they were net short $58B worth one year ago. (h/t Jason Goepfert)
Bears like to point to the unsustainable level of corporate profits in a slow-GDP economy, but the S&P 500 - trading at just 14.7X earnings vs. a long-run average of 16.6 - may have priced this in, writes Scott Grannis. If the economy stays slow - but avoids recession - stocks should do just okay, but if we get a pickup in growth, look out for far higher prices.
Another bear gets carried out, as the S&P's close over 1450 has Bob Janjuah backing off his call for stocks to lose maybe 25% of their value by year's end. Tactically neutral at the moment, Janjuah says risk assets are in a bubble, and a weekly close below 1450 might have him short again with the modest target of 800.
The S&P probably deserves a multiple of 20 given the Fed is going to be holding short rates at 0% and the 10-year around 2% for many more years, writes David Kotok. Given this and a conservative earnings guess of $90, fair value for the S&P 500 would be 1800 today. As for the end of the decade? If the Fed's going to keep with this, his previous guess of 2K is far too conservative.
More on the shift from fixed income to equities: Jason Goepfert's "smart money/dumb money" indicator tells him stock prices could be set to crack. Currently, 67% of the "dumb money" expects a rally, he says, against just 50% expecting it in August when prices were 10% lower. A 3-8% correction (chart) typically follows when sentiment moves to such an extreme.
An unmistakable trend is under way as investors cash in their bond ETF holdings and pour the money into stock funds. "A lot of fixed-income oriented people have decided to start chasing equities," says an ETF trader, as they fear being left behind by an equity market juggernaut (they already have been). Also seeing a rush are precious metals ETFs - the physical and the miners.
An outstanding set of charts (I, II, III) from Deutsche (h/t MicroFundy) tracks the S&P, CRB, and the dollar index before and after the Fed's (now 3) QE programs. If it's true - as the charts suggest - that the effect of the drug wears off with each successive application, stocks, commodities, and currencies may not have much more in gains ahead of them.
A check back to QE2 found stocks rising on speculation of an announcement, and spiking on the day of the announcement - very similar to this time around. The next month, however, saw a sizable sell the news downturn before the effect of the Fed action kicked in, sending stocks on a big multi-month rally.
iPath® Short Extended S&P 500® TR Index ETN is linked to a leveraged return on the inverse performance of the S&P 500® Total Return Index (the "Index"). The Index is a capitalization-weighted index intended to provide an indication of the pattern of stock price movement in the U.S. equities market, covering 75% of total US equities market. S&P chooses companies for inclusion in the Index with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the U.S. equities market.
See more details on sponsor's website