We wanted to review some key indicators we track which show the market is still looking pretty bullish.
AAII, Individual Investor Sentiment.
We always want to know where investors are sitting. We never found success however to use sentiment to catch peaks and troughs. What sentiment does tell us is if investors are catching on to the trend. If they are not, there may be more to go.
It's fair to say we are in a bull market, maybe a very strong bull market. That said investors are still not catching on.
Here's what AAII last said:
"Bullish sentiment, expectations that stock prices will rise over the next six months, rose 4.1 percentage points to 35.3%. The historical average is 38.5%."
The market is at all time highs yet the average investor is less bullish than the historical average.
Collectively investors have not yet bought into markets hitting new highs. That tells us there is still upside potential.
Market Moving Fast Or Slow?
When the market moves fast and volatile it is typically a sign of nervousness and bearishness.
This market is pretty quiet. Volatility did pick up in the last week. That's fair given it was the first major test of the "Trump Rally" with the first piece of legislation to (almost) hit Congress.
Above is the S&P 500 ETF (NYSEARCA:SPY). You can see a very tight channel after a nice sell off.
That tight channel in simple trading terms is called "buying."
Again, this may be overly simplistic but again in trader terms, buying is... bullish.
That's core to our very proprietary model (buying is bullish).
Slow markets are typically bullish markets.
The market ate up the Trump "bad news" and quickly went back up. That needs to be noticed as "bullish action" on bad news.
Not Just The Trump Rally?
This part starts to get exciting (if you weren't totally excited already).
The Trump Rally was based on Trump, right?
But President Trump was unsuccessful in his first major piece of legislation that needed to pass Congress.
That implies that investors who solely bought for pro-business legislation should be very worried about future legislation.
If this rally was all because of Trump we wouldn't have seen such a swift snap back.
Those who sold because of pro-business legislation risk sold for a few minutes but other buyers came in and sellers bought again. That was fast.
That tells you that this rally is not just Trump.
Ponder that idea for a second.
Markets are going up because (trader analysis here) they want to go up.
The Trump Rally may not be because of Trump after all.
Lots Of Bearishness In The Media
We don't want people to look bad so we won't say who is saying what. You can peruse the media yourself. But scanning the titles of reports and calls each morning surely has a bearish bent.
Bearishness and calling tops near all-time highs is not bearish, it's bullish.
Here are some titles we saw in the last couple of days.
"Heading For A Correction."
"Stocks In Correction For Months."
After the two-day rally off the Monday's 9:30 low,
"Trump Trade Slipping."
"Trump Trade Fading."
"Markets Could See Heartbreak if Brexit..."
Most of the articles out there have a bearish bent.
That's a lot of bearishness for being 2% from the high, wouldn't you say?
While President Trump still gives us permission to call this the "Trump Rally," there may be more to this rally than Trump. Markets may have proven that this week so far. That is pretty big news. The market is going up (deep trader analysis here) because it wants to go up. That's bullish.
President Trump, we love ya.
ETFs reported by Elazar Advisors, LLC are guided by our daily, weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report.
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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SPY, BUT THIS COULD CHANGE AT ANY TIME SO DON'T GET TOO SOLD ON THIS DISCLOSURE. WE COULD TURN AROUND AND SHORT IF WHAT WE SEE CHANGES over the next 72 hours.
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