Sentiment Speaks: Equity Markets Showing Shades Of 2015

Summary

• A weak December leads to a “never ending rally”.
• Similar sentiment signals what we saw in 2015.
• Inflection point is upon us.

A Weak December Leads To A “Never Ending Rally”

The market action from the December lows has been painful for those under positioned and unkind to Bears. After bottoming at 21,712 at the end of December, the Dow Jones Industrial Average has since rallied more than 4,500 points or more than 20% off of those lows. Furthermore, the move up off of those lows has seen very few retracements while just steadily marching higher. As we once again approach the all-time highs once again we have to ask is this market on a path to blow out the highs that were struck last fall or is there still more pain ahead as we move into the spring and summer months.

Similar Sentiment Signals To What We Saw In 2015

For the past few weeks especially I have been having an eerie sense of Déjà Vu. It just feels like we have been here before. After reviewing hundreds upon hundreds of chat rooms comments, financial tweets, and articles from the pundits I see a lot of similarities in sentiment now and what we saw in the fall of 2015.

During the fall of 2015, the Dow had seen a 17% rally up off of the August lows after having fallen 16% off of the May highs. This action followed an incredibly bullish run that had not seen any significant corrective moves since the lows that were struck four years earlier in 2011. All of the previous corrective moves had been bought up with a firm "buy the dip" mentality, and there were no follow-through corrective patterns during this time.

As we approached the previous highs in October of 2015, this "buy the dip" mentality seemed to be the sentiment once again in the market.

Some of the comments I was seeing

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

I am an active trader and may initiate a position at any time in either direction in any of the tickers noted in this article.