Inventory worth indexes are again at document highs. But the inventory market’s sentiment indicators have turned stubbornly bearish over the previous couple of weeks. We famous this improvement every week in the past and concluded that it is perhaps a bullish sign from a contrarian perspective. We aren’t certain why there are extra bears and fewer bulls not too long ago.
Final week, the bond yield fell from 4.79% on January 14 to 4.60% immediately. That transfer was triggered by cooler-than-expected information and dovish feedback by a Fed governor.
The present This autumn-2024 earnings reporting season is beginning with numerous better-than-expected outcomes, led by the large banks. The information on AI capital spending stays bullish for semiconductor shares. The Citibank Financial Shock Index is again in constructive territory (chart).
The Index of Coincident Financial Indicators rose to one more new document excessive in December (chart). Even the Index of Main Financial Indicators, which has been a woefully deceptive indicator, was up final month. Our favourite financial indicator is ahead earnings per share. It rose to a document excessive through the January 16 week.
Maybe buyers are spooked about Trump 2.0. But the inventory market rallied through the first two days after Inauguration Day. Let’s overview the most recent sentiment readings:
Buyers Intelligence sentiment survey
The Bull/Bear Ratio rose to 1.48 this week after dropping to 1.32 final week, which was the bottom in a yr (chart).
AAII sentiment survey
Within the AAI survey (as of January 16), bullish sentiment in regards to the short-term outlook for shares fell, whereas bearish and impartial sentiment rose (chart). Bullish sentiment sank 9.2ppts to 25.4%, the bottom share since November 2023 (24.3%) and under the measure’s historic common of 37.5% for the third time in seven weeks.
In the meantime, bearish sentiment climbed 3.2ppts to 40.6%, unusually excessive studying and above its historic common of 31.0% for the eighth time in 9 weeks, whereas impartial sentiment climbed 6.0ppts to 34.0%—above its historic common of 31.5% for the primary time in 12 weeks.
In abstract, whereas inventory indexes proceed to hit document highs, sentiment indicators stay puzzlingly bearish. This divergence between market efficiency and investor sentiment may sign underlying warning or current a contrarian alternative.
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