Are the corporate economy and the stock market topping?
Last time I asked you guys “Who’s more scared right now, the bulls or the bears?” here were the results and my commentary about them:
109 – Bulls
44 – Bears
So, it was about 70% who said that the bulls are more scared right now. That’s not an extreme reading on the “Who’s More Scared” scale, but it’s getting there. When 90% of more of the respondents agree on the bulls being the most scared, it can be a great contrarian indicator to buy. And vice versa for when the bears are 90%. The markets are trying to rally today, but most technicians would tell you that it needs AAPL to kick in with some gusto if a broader rally is to stick. Why they would all agree on that and whether they are right are different questions altogether.
The markets are down about 3% since then, probably more because earnings and guidance have overall been “weaker than expected” than because of anything to do with sentiment. Like I wrote at the time of the last poll, October 15, when the “Who’s more scared” reading gets closer to 90% in one direction or the other it can be a great contrarian indicator, but it’s not so useful until then.
Which leads me to asking you right now “Who’s more scared, the bulls or the bears?”
As for trading this morning, I’m not doing anything just now. I’ve raised cash and hedged the portfolio when stocks were mostly higher and we’ve frankly had some great home runs on the short side of late with Apollo, DLTR and LPS all outright crashing after we entered the short. You don’t always get so lucky in your “hedges”, which is what I happen to consider most of my shorts right now since I’ve been net long and bullish for the last few years.
Speaking of which, the earnings and guidance are indeed coming in lighter than the markets expected, which is what I’d been expecting, and even when the results are “good” as in iPhone supplier CRUS’s earnings report yesterday, the markets are punishing the stocks. The question then becomes is the market rightly looking past the near-term results because the corporate economy has truly topped and is turning south or if the market is mispricing these stocks on the cheapside as another record year of corporate profits is ahead of us.
I’m not changing my stance or my overall net positioning, but I am throwing a yellow flag about the economic and market cycle.
At any rate, try not to let my commentary affect your answer:
Who’s more scared right now, the bulls or the bears? Write us at support@tradingwithcody.com or post your reply in the chat.
