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sentiment remains extremely bearish, what does that mean for the coming months?

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April 12, 2009 – Comments (8)

Sentiment on the web remains extremely bearish, extremely bearish.  I've spent alot of time reading CAPs this weekend, and by a loose count bearish entries must outnumber bullish ones 5:1.  In fact, severely bearish commentaries remain basically the norm, and extremely bullish commentaries practically don't exist. 

The bulls are cautious.  They offer that they aren't sure what the future holds, that taking profits might make sense, that while tomorrow might bring a downturn, stock A or stock B are cheap enough to be a good long term buy.  They offer that their horizon is long term. 

The bears are aggressive.  They KNOW that things are going lower than ever, they KNOW that society faces wild unprecedented problems, they KNOW the banks making money is a lie, they KNOW anybody long is gullible stupid a moron or worse.  They are CERTAIN, they are vigilant or even militant, and they are comforted by the saftey of numbers.  They remain the majority, which must fuel the fires of their bearishness.  And they talk about the "wild bullish sentiment" and about how things "have gotten so bullish".  Where?  What posts are aggressively bullish?  I can't see it.  I can't really find even one. 

By far, CAPs remains bearish.  Taking the common logic that sentiment is a counter-indicator, this would imply that the markets might have room to move even higher in the coming days, weeks, or months.

I spent a couple of hours this evening reading articles and threads on seeking alpha.  They are similarly bearish.  I did not encounter a comment that read something like "this sucker is going to 900 by may, 1000 by july, get on now or miss out" . I did encounter confident bearish remarks.

I don't claim to have read every post on caps or on seeking alpha, and I don't claim to know what the short term direction of the market wlil be.  I, personally, am long but hedged and cautious.

So sentiment is still bearish, easily.  And yet here we are, vastly off the bottoms.  Is the still-prevailing bearish sentiment an indicator that this rally might have more room to run than most of us would believe?  Or is it an indicator that the market is braced to tumble on any hint of bad news?

Time of course will tell, and whoever's leaning was right will claim to have known all along.  I for one, claim only to not know.  But, as I always say,

good luck to all longs!

8 Comments – Post Your Own

#1) On April 12, 2009 at 11:59 PM, usmilitiadude (31.68) wrote:

I started reading some caustiously bullish short term sentiment and it was nice to read a different opinoin and challenge my own sentiment.  Also, there was the idea that these are cheap prices and even if it goes down in the short term, think about it in terms of 5 to ten years. I'm not sure what to believe.

P. S. Jail the fraudulent bankers!!! Pass it on.....tell everyone you talk to tomarrow. Before you know it, Kevin Bacon will hear about it. Do we want justice?

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#2) On April 13, 2009 at 12:10 AM, russiangambit (29.30) wrote:

But why do you think CAPS blogers are representative of wider population? All my coworkers with no exception beleive that their 401Ks will come back in a couple of years. They probably will, but probably due to inflation, not growth. 

When wider population realizes that they were hoodwinked, it is not going to be pretty. But they might never understand what happened, anyway. Middle class is very aware that their wealth significantly deteriorated in the past 10 years, but they are still not sure how exactly that happened, and so their low simmering anger doesn't have a target yet. Let's hope Obama will be able to pull some magical trick out of a hat to make everything appear better before that anger finds a target. Unlike doom& gllom crowd, while I am not optimistic, I have no desire to live through a chaotic collapse yet again, it is bad for everyone.

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#3) On April 13, 2009 at 12:20 AM, portefeuille (99.60) wrote:

I really enjoy finding contra-indicators. I am almost tempted to see this post as a bad signal for the stock market, but one article should be o.k.!

A bullish indication might be derived from the way the "long and high beta" "caps" players are about to "take over" the "top ranks" in the "caps" game almost entirely unnoticed by the "bear circles" (busy-bears-indicator!)

One of my favourite contra-indicators so far was this comment by abitare on December 15, 2008:

FYI - I am still #1 in points with 12k. I still think it is going to be very difficult for any fool to catch that. Points are very tough to aquire.

While this statement alone was not necessarily a "bearish" statement, the post was (... I think. at least the headline was "A More Bearish View: Change you Won't Believe (Part 3)" and I found the words "morbid" and "gold" so I guess it was - I am somehow incapable of actually reading these posts ...).

 

At the time I could not help making comment #17 (I had some 3000 "points", so around 1/4 of 12k).

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#4) On April 13, 2009 at 12:43 AM, checklist34 (99.72) wrote:

This post was an observation, not a prediction, and its not bullish at all, nor bearish at all, portef.  There was nothing directional in my post, only questions and observations.  Before Thursday I was leaning pretty nicely towards thinking a pullback of 10% was probable.  thursday reminded me that its best if I just don't make short term predictions, lol.

I made some caps points and real world $$ recently by being bullish and high beta.  My portfolio in the real world didn't contain one single sotck that was less than 75% off its highs before the recent run-up.  lol.  Maybe not one single sotck even as high as 25% of its high. 

I totally agree with you thats its darn hard to read through super-bearish posts.  I am sometimes guilty of skimming and then posting a silly reply.

good luck!

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#5) On April 13, 2009 at 12:49 AM, checklist34 (99.72) wrote:

gambit:  I tend to roll my eyes a little at doom and gloom predictions of any kind.  Global warming, food shortages, global cooling, overpopulation leading to lack of medicine and food, japan was going to take over the US, we're always running out of oil very soon and to considerable disaster.  nuclear powre is going to kill us all. 

My whole life someone has been grabbing tons of headlines with some prediction most dire or other.  Global warming isn't even hardly a new prediction, its recycled from 20 years ago.  20 years ago when I was in 3rd grade (maybe 25 years ago) we learned that new york and los angeles would b eunderwater within 20 years.  Now its 20 more yeras, in 20 years it'll be 20 more.  it'll always be something, always be some disaster just around the corner, and CNN will always give it air time.

That commentary isn't really related to your post, but I thought i'd throw it out there to shed some light on my general outlook.

I've noticed here in the midwest that as the market fell and fell, more and more people i'd talk randomly too here and there got bullish.  My insurance agent, a salesguy at hte local car dealer, old chums I have a beer with now and again...  started wanting to buy stocks.  So their attitude was very counter to the attitude during that time on caps.

So you make a good point in observing that online web posting is not indicative of the broader population.  Good call

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#6) On April 13, 2009 at 12:51 AM, checklist34 (99.72) wrote:

hey militiadude, i've no doubt that each day of the last 4-6 months has had prices that will look cheap if we go out a few years into the future. 

long term, i'm bullish from here.  short term, lord knows.

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#7) On April 15, 2009 at 6:50 PM, ClandPhoenix (86.25) wrote:

The bearish overkills vs the bullish peeps reminds me of a quote that goes something along the lines of respect those that go seeking the truth be skeptical of those who claim to have found it.

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#8) On April 18, 2009 at 11:03 PM, SNHamilton (99.97) wrote:

Hehe, good point checklist.  Not only that, but most of the bears claim to have lots of money in cash, which means the only way they can effect the market is to capitulate and bring it up more (or yell at the bulls and hope they sell).  I think its funny when I bear tries to scare me by claiming they are all cash since it has the opposite effect on me than I think they intend.  Much scarier would be if bears were saying they were fully invested but on the slightest hint of a downturn were going to sell sell sell.  I would be surprised if there is no downturn at some point, but the bears will be so scared of missing the next up turn by that point that I would be surprised if it lasts that long :).

 

Regarding how representative CAPS players (particularly high ranked ones) are...well...maybe not that representative of your barber, but at least some of their opinions do seem to mirror at least some of the big money dudes.  Which might be more relevant than your average midwest barber. 

-Sam 

 

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