Beginning-of-the-week Thought

After last week’s shelling, everyone is on edge, it seems, including myself.  This morning I’ve done a very informal survey of sorts, compiling the bottom lines of some folks whose opinions and track records I respect.  Here they are, with no gaming, the coincidental equality of positive and negative views is purely that, coincidence.  On the other hand, it might also coincidentally reflect the uncertainty that usually pervades things.  Quotes are in blue, and the length of the bearish excerpts are not a reflection on the weight I place on it . . . I don’t think so, any way.  To balance that out, I’ll add a fourth to the neutral-to-negative side.

On the neutral to positive side:

  • Jason Goepfert, of sentimenTrader, who is all numbers, says that, historically–back to 1928, when we’ve had actions like last Friday’s in similar environments (i.e. strong market momentum near a high), the action rarely marked a major peak.  That occurred in just 3 of 12 times.
  • Strategas Research called the Goldman Sachs (GS) story noise.  Said that both the fundamental and technical backdrops are positive, while the shorter-term technical backdrop might be murkier.  ” . . . short-term uncertainties aside, technically it’s very difficult to get structurally bearish on the broader market.”
  • JPMorgan–the only one cited here that is a buy-side source–expected to ride out the correction and not try to position for it.
  • Ned Davis, the man, says that the market can’t be faded (read, sold) when some historically strong indicators are flashing new buy signals.  Still, he remains “neutral to mildly bullish,” because of other concerns.

On the neutral to negative side:

  • Dennis Gartman, while not translating GS news into a market malaise, listed nine factors–in a most cumbersome way, I might add, which is typical for him (e.g. “sixthly,” “seventhly,” “eighthly,” etc.)–that were all implications.  He pulled out the familiar saying, “there’s never just one cockroach,” meaning that GS is not going to be the only one.  GS will never be the same company.  There are political implications, too.
  • David Kotokof Cumberland Advisors sees the need to have some cash on hand.  “At Cumberland we have raised some cash.  We exited the capital-market ETF [Cumberland is an ETF-only shop].  We expect this news will be the catalyst for some market correction.  It is long overdue.”
  • Jeff Saut, of Raymond James (okay, it’s a sell-side firm, too, but Jeff is an exception to the run-of-the-mill sell-side strategist) took a decidedly dim view of last week.  He talked about bearish voices on financial television being subdued by bullish hosts and other guests.  “As for the ‘here and now,’ we are increasingly cautions, believing a near-term ‘top’ in the equity markets has been registered.  Longer-term, we remain bullish, thinking the profit-cycle recovery is alive and well.”
  • Investors Intelligence, which has been around since the mid-1900s publishes, weekly, its Buy/Sell Climaxes report.  A buy sell climax is when a stock records a new 52-week high low and ends the week with a loss gainLast week produced a big buying climax, the fourth largest of the last year, and every similar spike over the last year lead to a correction.  Historically, “[their] work shows that sellers into buying climaxes and buyers into selling climaxes [i.e. doing the opposite - GPS] are right about 80% of the time.’]

One problem with the market of late has been the high level of optimism, and Friday’s action hasn’t yet been captured in many sentiment gauges.  If we can work off some of the optimism and not suffer much technical damage (i.e. violate support levels), we should be okay.

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