Friday, October 2, 2009
Heads I Lose Tails You Win
Looking at the financial press this week has been like trying to talk to a schizophrenic with two equally dominant personalities. The bearish side is absolutely convinced that the 50% market rally since March is about to implode, leaving Grandma even more destitute that she was a year ago. The bullish side quotes 'money on the sidelines' and V-shaped recoveries as evidence that the worst is over. The Financial Times today has a bearish article about Q3 earnings right next to a column saying that we are now in recovery from the recession. Now, as I have said, I am a terrible trader. But there is one thing I am pretty sure of having noticed it a few times in the past 30 years. That is: when a majority of brokers and traders agree on the market direction the market is sure to turn and do the opposite. And YouDevise's Trade Idea Monitor (TIM) weekly report says that total new long ideas (as a percentage of all new ideas sent this past week to investment managers in real time through TIM) increased 3.50 points to a bullish 65.55% . (Over 50 is bullish; 50 is neutral; under 50 is bearish.) A year ago the TIM was 66.95% - also a year ago the DJIA was at 10,831. It then plummeted over the next 6 months to around 6,500. How bullish is that?