Reply to thread

Bonds:

[ATTACH=full]191336[/ATTACH][ATTACH=full]191335[/ATTACH]

Today's Chart of the Day was shared by @SubuTrade.

 

• Stocks and Bonds gapped higher today, fueled by a cooler-than-expected inflation report. The +20yr Treasury Bond ETF ($TLT) had its best session since the election, rising +1.7%.
  
• $TLT filled a huge gap from November 2023 yesterday before closing at a 52-week low and gapping higher this morning.
  
• @SubuTrades points out that sentiment and positioning are ripe enough for Bonds to form a meaningful bottom. Short interest for $TLT is highly elevated while experiencing massive outflows over the past 2-months.
  

The Takeaway: After exhibiting signs of capitulation, the +20yr Treasury Bond ETF ($TLT) had its best day since the election today.

Today's number is... 28.5

Market sentiment is shifting as the average bears reached 28.5 last week, the highest reading since November 2023.

Here’s the chart:

[ATTACH=full]191341[/ATTACH]

(right-click and open image in new tab to zoom in)

Let's break down what it shows:

• The blue line in the top panel represents the price of the S&P 500 index.
• The green line in the middle panel shows the average bulls from the Investors Intelligence (II) and the American Association of Individual Investors (AAII).
• The red line in the bottom panel shows the average bears from the II and the AAII.

The Takeaway: We're beginning to notice more bears entering the market, as the average sentiment among bears has reached its highest level since November 2023. At the same time, optimism appears to be fading, with the average sentiment among bulls hitting the lower end of a year-long range.

Typically, we say that nothing influences sentiment like price movement. However, that's not entirely the case in the current environment, as most indexes are only 3-4% off their all-time highs.

Do the bears have insights into further weakness incoming for stocks?

From my experience analyzing market sentiment, I’ve learned not to take a contrarian approach but rather to follow the crowd until a reversal occurs.

Is that reversal happening now?

Given the weight of the evidence is leaning bearish, it is quite possible.

What are your thoughts?

I am OVER these market holidays:

Since 1998, markets have closed for Martin Luther King Jr. Day, which is this coming Monday. Can we predict the market’s direction for the upcoming week? In this article, I examine whether there’s a tendency for the S&P 500 to go up or down during the shortened trading week. I also break down the week by trading day then finally, I look for stocks that, for whatever reason, tend to outperform or underperform next week.

MARTIN LUTHER KING JR. WEEK

The table below compares the S&P 500's performance during the week of Martin Luther King Jr. Day with its performance in other weeks. Historically, the holiday week has been a bad week for stocks with the index averaging a loss of 0.57%, with just 41% of the weeks being positive. Other weeks, the S&P averages a gain of 0.17% with 57% of weeks positive. Even when the holiday week has been positive, it tends to be limited in upside based on the average positive return being significantly below the typical average positive return.

[ATTACH=full]191342[/ATTACH]

This next table breaks down MLK week by the day. The week tends to get off to a bad start with Tuesday averaging a loss of 0.26% and less than half of the returns positive. In fact, the S&P 500 has been down the day after Martin Luther King Jr. Day in seven of the last eight years. During the holiday week, Wednesday has tended to be the best day for the market and Friday has tended to be the worst.

[ATTACH=full]191343[/ATTACH]

BEST AND WORST STOCKS FOR NEXT WEEK

This first table below shows stocks which have bucked the trend of the general stock market during MLK week and have tended to perform well. The table is sorted by percent positive then by average return. No stocks have been positive in each of the last two years. Two stocks, however, have beaten the S&P 500 every year for the last 10 years -- Workday (WDAY) and Intuit (INTU). Technology and software stocks are prevalent amongst the best S&P 500 stocks during MLK week.

[ATTACH=full]191344[/ATTACH]

This next table shows the worst performing stocks during the week of Martin Luther King Jr. Day. Again, it shows the stocks with the least positive returns and then sorts it by average return. Financial stocks and coal, oil and gas stocks are overrepresented on this list.

[ATTACH=full]191345[/ATTACH]

I want to add JPMorgan Chase (JPM) and Eastman Chemical (EMN) to the worst performers list. They didn’t make the list because they’ve been positive 30% of the time during MLK week over the past 10 years. To make the table above, it needed to be 20% or worse. These two stocks, however, were the only ones to be defeated by the S&P 500 in each of the past 10 years.

[ATTACH=full]191346[/ATTACH]

[ATTACH=full]191339[/ATTACH][ATTACH=full]191338[/ATTACH][ATTACH=full]191337[/ATTACH]

jog on

duc