Sentiment Screams Stocks Should Soar not Sink

How many times over the past few days have you heard negative views on the prospects for stocks. Analysts and pundits talking down earnings estimates coupled with all the uncertainty that surrounded the fiscal cliff and now the debt ceiling debate. There is no shortage of negative short term views. Oh some say they are ready to buy the dip, it just needs to fall from here. But why own stocks now? The only reason is that they are better than bonds according to Jason Trennert at Strategas Research Partners in this CNBC clip from Thursday morning.

He sums up the mood very well, you should be in stocks because the institutions need to own them, and bonds will have negative returns, but it will be better to buy them lower, after the dip. The rest of the day I heard no less than 25 other interviewees express some variation of that same pitch. Stocks can be bought after they fall. There is such a firm belief that the market is in for a correction that it is no wonder it is churning. Add in that many technical traders see things like the Volatility Index at tiny levels and the market Indexes like the S&P 500 below at multiyear highs or near triple tops and it gets even easier to sit and watch.


But shouldn’t all of this negativity be a contra-indicator? If everyone is negative then noone else can become negative, so the top in negativity must be in. Ralph Acampora, the Godfather of technical analysis, stated recently that in his over 40 years in the market he has never seen a more negative collective view. This gets him, and me by the way, very bullish. If you did not see his list of 11 reasons why he is bullish you can find them here. All this negativity may end up being right, but if you turn off all the noise and look at the price action, or even just Ralph’s tweets, you might find yourself better prepared.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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