Key Takeaway: The disconnect between what investors say and what they do continues to be overlooked by sentiment indicator tourists. While consumer sentiment (what they say) is near its lowest levels on record, household equity exposure (what they are doing) remains elevated. Moreover, many are trying to call peak pessimism (with no evidence that it has reversed) as a catalyst for a market bottom (with no evidence that the conditions for a sustainable rally are in place). Sentiment is a condition and that condition right now shows fear and concern continuing to build. Being contrary to a crowd that has not turned can lead to getting trampled.
Sentiment Report Chart of the Week: Learn Volumes By Looking Beneath The Surface
We balance how investors say they feel with how they act. We can do the same with the market, balancing surface-level price action against what we see when we dig beneath the surface. This seems all the more important amid the crescendo in calls that the market has bottomed, is bottoming, or will soon bottom and in an environment when price swings are exaggerated. When we look beneath the market’s surface two things especially stand out. First, after Friday’s 13-to-1 up volume day failed to be followed by strength, today is poised to bring another 9-to-1 down volume day. Second, it is difficult to speak constructively about the market when more stocks are making new lows than new highs. That has been the case for 25 weeks in a row, which is the longest stretch since the Financial Crisis and a substantial push back to the claim that this has been just a normal market correction.
