For today’s write up…I wanted to speak on where we are heading into the Summer.
Let’s start with something I’ve been warning of for the last few years. The use of the indices to measure market direction, health or analysis is becoming defunct. I’ve been noticing this over the years and have done my best to give members alternate ways to measure market direction, health and overall analysis that tells a deeper story.
Bottom line, the rotation into ETFs and Indexed products over the years has literally thrown everyone off an important underlying narrative. 2014 was the best example of this. The market crashed that year. Period. Worst year in terms of overall breadth in over two decades. You’d never know that because the bid under the SPY kept it in an uptrend, despite 70% of stocks being down more than 10-20% that year.
Why do I bring this up?
This week I tried to make opportunity out of select strategic buys – away from the market. Do I feel good about them? Of course.
But what about “the market” here?
I don’t like the jump in bullish sentiment. This was part of the trap I had been speaking of at the Q1 Boot Camp. I said “real market corrections and analysis will take hold based on sentiment extremes…such as big +/- in overall sentiment ratings, big monthly fund flows, etc.”
Over the last month, people consistently sold out of stocks while sentiment plummeted…and the market went nowhere.
Market pops this week, AAII sentiment jumps 12 points to the average of 38.5. Enough to potentially slow things down for the month of May.
This is almost verbatim of what I said at Boot Camp…a rally into May that gets everyone excited about NOT selling in May and going away. This market move forced people to jump back in at some higher prices too.
While I am skeptical of what the SPY will do, I am thrilled at what individual charts continue to do. Before I get to firm on what I think May ends up looking like…I want to see where fund flows are pointed May 1st. I also want to see how strong/weak money coming into equities is. That will tell us whether or not it will be a long summer.
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website seems to be slow connecting today and have been getting gateway error messages
OA, appreciate this post and all your others. They are very helpful. I’ve got a question for you about a post a few days ago about the Trapped Bond Bulls.
Can you explain/shed some light on what you mean by the trapped money in the bond market contributing to $TLT’s gap down? Thank you in advance and big ups to your son. I think you’ll give Career Day a whole new meaning.
What part was unclear?
You think TLT makes new lows, OA?
I think lower, yeah.
There’s support below
Relatedly, going through charts this weekend, yield plays, e.g., the utes, are making my short watch list. Likely too low beta for OAites.
you were super clear in real can’t agree more on your view . I remain cauteously bearish for may but surprise lays around the corner , any geo/political good news can send anything up again and leave everybody in the dust and looming for a correction again .
many indexes need to test some supports though , they always did so soon or later algos will get there (summer)
No AHWOA today?
Thanks for this analysis OA. Keep it up!
Yikes, looks like my large planned average down on URA is coming a lot quicker than I expected. This is what I get for trying to be a trend follower on the way up. Back to strictly buying blood.
You said low 13’s would be a gift. You’re welcome.
-Jesus
Thank you jesus! Gonna plug my nose, make one final buy and try not to look at it for at least a year.
The reason you bought some extra time on GS is to account for potential weakness in financials at some point in May (perhaps first or second week)? Just asking as you tipically buy next month.
Thank you
Doubted we’d trace that broadening pattern in a straight line.
ALGN +12%. This thing never goes down.
Awesome call on FB
Long NTNX.
Do you love pain?
Pain? This is the best long in the world right now, friendo. Try to take your day trade cap off for once.
Bahahaha your 2014 crash narrative has a massive logical flaw in that on a cap and earnings weighted basis the S&P is the fn market. The tail doesn’t wag the dog. I’ll be suprised if fund flows suddenly turn overly bullish, but they might. Sell in May is not exactly revolutionary following a few strong quarters.
Fact, not flaw.
Thanks for sharing your analysis. I agree with your statement about being skeptical regarding the SPY but optimistic about many of the underlying charts.
OA any thoughts on ASPS as a long here?
Woah, what the fuck happened there?
Top is in on the Russell. http://read.bi/2oGec6B
With the vast majority of speculators short the $RUT, I’m sure you’re right (not).
Are the vast majority of specs short $RUT? Did you even read the linked article (which is super bullish on the Russell)?
OA, do you have any interest in something like $OMF possibly setting up?
CL setup looks nice
spread on the options on CL are terrible not going to start off 100’s in the whole
Noteworthy: Biggest Gold Miner ETF Just Saw Largest Outflows on Record
Link to bloomberg article:
https://www.bloomberg.com/news/articles/2017-05-01/biggest-gold-miner-etf-just-saw-largest-outflows-on-record
$NTNX acting all goth, wants to be left alone.
wow. OA nailed the bond short trade.