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SPY: Sentiment resetIn this chart I plotted the period following a sub 25% AAII bulls reading, followed by a sharp rise to 55% bulls at the peak in April 2021. We now reset back down to sub 25% this week, so we might be watching a 'coiled spring' situation in equities. This is not so easily seen in $SPY as the $AAPL performance as of late distorts how equities acted for the majority of people. I included the performance of my trading strategy in the period of rising sentiment, and during the last period with deteriorating sentiment. I expect to make outsized gains again as we get a period of steady trends once more. Note I actually caught the bottom in Nasdaq overall, but the gains from that outperformance round were retraced recently with a series of short term losses. Best of luck, try to milk the good times ahead. Outsized gains away, potentially. Cheers, Ivan Labrie.
AMEX:SPYLong
by IvanLabrie
10
Wilshire 4500- You are not in the crystal ball businessWhat a crazy time we are in. 5 months ago, all was gloom and doom. Last month, almost every asset class was up except USD. SP500 has been above 3200 for one month and Nasdaq has been hitting ATH for 3 straight months. How do you explain this market irrationality? One possible reason is that pension, endowment funds and investors are forced to invest in equity market in the ultra low-interest environment. According to AAII (American association of individual investors) asset allocation's survey in July, 33.6% is invested in stock funds and 28.6% is invested in stocks. Only 3.4% is invested in bonds. According to Nomura, growth stocks have been outperforming value stocks for the last 15 years . Investor's penchant for fast growth and high valuation stocks lead to more velocity and volatility. According to Chris Irons of QTR research, holding period for stock has been steadily dropping over the past two decades. In the last two months, the stock holding period has gone down from 8 and half months to 5 and half months. In the current environment, market is flooded with high momentum stocks and the lure of chasing the rainbow is driving the increasingly common day trading mentality. Such volatile atmosphere typically leads to more FOMO behaviors. It makes even more sense if you factor in the wide availability of zero commission and fractional trading. Positive vaccine news may have also lifted the investor sentiment and contributed to the irrational exuberance. Has the market factored in all the bad news as it was mostly immune to the record-shattering bad GDP and resurgence of Covid-19 cases in July? Despite the poor GDP #, most other economic indicators actually improved including the ones I showed in the chart. Stock market momentum may stall, or it may even crash in the near future. However, at this point, I believe it will take extraordinary events such as hyperinflation, weakening of dollar (lose of reserve status), sovereign debt crisis, massive eviction or consumer debt default to go back to March low. With programs like PPE and massive QE to infinity in place, FED will ensure that interest rate remains low and continue to bail out zombie company in order to keep unemployment lvl artificially low. Thanks for reading through my analysis. Please follow me and click like. Much appreciated.
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by Libratus