The Signs of Bear
- Retail investors have been pouring money into stock mutual funds. The fear of missing out on the sixth year of a bull market has created something close to a buying panic. Although not as maniacal as we saw in 1999, the stock cheerleaders are back and rooting for their stocks and mutual funds to go higher – just like they always do before a crash or bear market.
- The Investor’s Intelligence survey is concerning. The closely watched II survey shows a low proportion of bears (less than 20%), which some have pointed out is the lowest proportion since just before the 1987 crash.
- Sentiment indicators are pessimistic. The VIX, the put-call ratio and other major sentiment indicators suggest that investors and traders are getting complacent. Apparently, market participants believe that the Fed, or their fund manager, will protect them in a worst-case scenario.
- Fundamentals are being ignored. Obscenely high P/E ratios are passed over, along with soft economic readings (i.e. GDP and ISM). When the fundamentals are weaker than expected, the weather is blamed.
- The stock market crash of 2008 has been forgotten. Investors forget, but the market never does. Those who do not heed the lessons of the past will once again learn a painful lesson.
- The Nasdaq is soaring. The three-year chart of the Nasdaq has gone nearly parabolic, hitting a 14-year high of 4,351 on March 4. It’s the Go-Go years all over again. (And that late 1960s bull market ended with the 1973-74 bear market.).
- Fear and greed are taking over. When the market reaches the tipping point (and we’re getting closer), investors and traders buy “ATM” (anything that moves). The fear of missing out causes a buying panic.
The Signs of Bull
- S&P500 break out 1850 resistance, as of March 7, 2014 at 1878
- VIX < 16 (VIX > 16 is bear?)
- March 7, Strong job report
The factors impact market trend, Week of March 10, 2014
- Ukraine-Russia tensions.
- Federal Reserve March 18-19 meeting.
What to do now, Week of March 10, 2014
The bears have the potential to come back and buy following bears: ERY, FAZ, SOXS, TVIX, and TZA, when their price dip and sell with profits quickly.