Bullishness Down, Stock Allocations Up

Relatively speaking of course. Bullishness is down in our own survey (albeit modestly), but stock allocations are up for the new week.

It seems to me (based on media news items and message board sentiment) that most traders have now gotten the memo that the Fed is going to drive up stock prices (with QE2 and maybe QE3). As a result, fear appears to be slowly disappearing from the market. Remember those big whipsaw events from low to high and vice versa in months past? Mostly gone now. Our appetite for risk is rising. And that seems to be the theme being reflected in our tracker charts.




The Top 50 are now showing an overall stock allocation over 80%. I noticed bond exposure ticked up from last week too.




The Total Tracker charts also reflect rising stock allocations with a corresponding drop in cash level. What I find a bit interesting here is that those levels are approaching the same levels from mid-August just before the S&P 500 had its last deep plunge. Are we setting up for a repeat performance? It's possible, but we may need to get past this seasonal period before we know the answer to that question.

For the moment though, it's just something to watch.

 

[EmoDx]

The 14 day Money Flow indicator on Yahoo Finance S&P 500 IDX is at 81.10. According to Yahoo, any reading over 80 indicates that we may get a sharp correction as there isn't a lot of room for more money to enter.

Having looked at that indicator going back about 5 years shows that it is a loosely tied indicator, with corrections coming anywhere from a few days to a few weeks in the future. That being said, my opinion is that we'll drift sideways with a slight negative bias due to people locking in profits.

I am a rookie at evaluating markets so I am interested in your view of this indicator and it's possible correlation to the data you have provided.

- Emo

 

[coolhand]

Thanks for pointing that out. I'm not surprised by that money flow percentage. And I agree that the timing of a correction is difficult to measure. Especially in this accommodative Fed environment.

Since the media appears to be only beginning to beat the brush to drive cash accounts into the market, it would not surprise me to see price continue to rise for a few more months (modest sell-offs notwithstanding).

I posted a link in a couple of threads on the MB with a scenario that was postulated by Mark Young on Trader's Talk. He offered a reasonable explanation of how this market might play out and that we could move higher over the next few months based on his observations. I've discussed this with a few friends of mine who have MBAs and market experience about this scenario and they agreed it made sense. But it's only one possible outcome of many. Still, I always pay attention when a pro speaks.

The 14 day Money Flow indicator on Yahoo Finance S&P 500 IDX is at 81.10. According to Yahoo, any reading over 80 indicates that we may get a sharp correction as there isn't a lot of room for more money to enter.

Having looked at that indicator going back about 5 years shows that it is a loosely tied indicator, with corrections coming anywhere from a few days to a few weeks in the future. That being said, my opinion is that we'll drift sideways with a slight negative bias due to people locking in profits.

I am a rookie at evaluating markets so I am interested in your view of this indicator and it's possible correlation to the data you have provided.

- Emo