Maybe it’s just me, but it sure seems that just about everyone is bearish.
Nearly all the financial television talking heads, just about all the postings I read on Fin-Twit, nearly all the newsletter writers I follow, and the bulk of respondents to sentiment surveys are all bearish.
I’m bearish, too – longer term. But I naturally lean that way. And, I’m aware enough of my bias to ignore it.
Normally, you might expect that I’d be comforted in knowing that everyone else agrees with my opinion.
I could go ahead and write about the market being on the verge of falling off a cliff, and everyone would nod their heads in agreement, and write in about how smart I am.
But, as we know, the market rarely rewards the popular opinion.
Investor sentiment is a contrary indicator. So, with just about everyone lining up on the bearish side of the ball, the odds favor the bulls making another run higher.
The market needs to rally enough to shake the bears out of their short positions and force reluctant bulls back into the market. Then, once everyone is positioned on the long side of the market again, the bear can take another swipe.
For the past several weeks, the stock market has been slowly pressing higher. Heck, the S&P 500 is trading near its high for 2023.
But, folks seem even more bearish today than at any other point this year.
So, despite all the very valid reasons to be afraid of the stock market right now, and despite my natural inclination to lean bearish… I’m looking for another rally.
Plus, there’s the look of this chart…
We looked at this chart a few weeks ago when the S&P 500 was at 4133. We suggested the chart leaned bullish, and if the S&P could close above the February high of 4180, then a run towards 4300 was possible.
The index popped above 4180 earlier this week.
Granted, there are plenty of warning signs – like the fact that it’s only a handful of names that have been powering the market higher, and high yield bonds are diverging from the action.
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But, if we’re being completely objective and looking only at the chart pattern… the setup looks bullish for another run higher – perhaps to the 4300 resistance level.
Maybe then folks will turn bullish. And, maybe then we can get the selloff that everyone is waiting for.
Best regards and good trading,
Jeff Clark
READER MAILBAG
Are you looking forward to a selloff?
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