Update: Sentiment
Macro, Long/Short Equity
Seeking Alpha Analyst Since 2015
During my 44-years of investing, I have come to understand that the only constants in the stock market are fear and funds (money), and that Modern Monetary Theory (MMT) provides the best description of how money moves through the economy.
In partnership with David Huston, and in association with Alan Longbon we search for and analyze repetitive sentiment and fund-flow-based patterns in the stock market's price history, and offer a Marketplace service, Away From the Herd (https://seekingalpha.com/account/research/custom_subscribe?slug=ang-traders), that reports our findings and allows subscribers to replicate the trades we are involved in for our own accounts. My four decades of experience in the market have taught me to not trade "for the sake of trading". Identifying, and staying with the primary trend is key to wealth accumulation. We use a variety of investment instruments such as stocks, ETFs, and options to take advantage of opportunities as they arise.
Summary
- If we do not get a pullback in the market before the end of the quarter, then we can expect one before mid-quarter in the new year.
- There is a slight bias to the latter.
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The AAII survey showed a 4% shift from bear to neutral (confused). Bear sentiment below 30% is concerning, but since bull sentiment is below 50% we think it can stay at these levels for some time.
A repeat of the 2018 pattern is still in play
The bull-minus-bear differential, however, resembles December 2016 when the SPX started a year-long monster rally (chart below).
The equity-only put:call ratio is normally negatively correlated with the SPX. When the correlation spikes into the positive, the return to the mean is accompanied by an SPX rally (vertical blue lines and green arrows on chart).
We have been saying for a while now that if we do not get a pullback in the market before the end of the quarter, then we can expect one before mid-quarter in the new year; we think there is a slight bias to the latter.
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