Technical Analysis is the study of the behavior of the market and its participants.
So while identifying price trends is our ultimate goal, sentiment plays an important role in that process.
Prices don’t move up or down because of “fundamentals” or “the economy”. The price of assets move based on positioning.
When investors are all positioned one way, and are at a consensus, who’s left to drive prices further in that direction?
Last summer we saw some of the most pessimistic sentiment towards stocks in history.
Some of that sentiment has started to shift a bit, like in the AAII and II polls. We’re back somewhere towards the middle in those. You need, at least, some bulls to buy stocks to have a bull market.
But when it comes to Fund Managers, Cash is still their largest position, and they’re most bearish on equities.
This is not something we see historically right before a major market selloff. Quite the opposite, in fact.
This is fuel for further gains. This cash needs to be put to work.
J.P. Morgan asked investors if they plan to increase or decrease exposure to stocks in the coming days/weeks.
We’re down to only 17% of respondents who are looking to add to equity exposure:
Again, it’s when they all plan to add to equity exposure that investors should start to worry.
Currently it’s the exact opposite.
They’re all scared to death.
And the S&P500, Dow Jones Industrial Average and Nasdaq100 all keep closing at new 52-week highs.
This is not something we see in downtrends.
So what do we know? Stocks have been going up consistently over the past year. And investors are not participating.
Who on earth could they be listening to?
Well, let’s remember that after the greatest first half to the Nasdaq in history, Wall Street strategist currently have their most bearish second half outlook on record:
Investors have found themselves following wall street strategists into really bad decisions.
Remember when locking in 5% on your cash was a good idea?
That couldn’t have been a worse idea.
You could have put you money almost anywhere else and had a better outcome.
When something sounds too good to be true, it probably is.
The bull market continues.
There’s plenty of cash and dry powder on the sidelines.
We have the data.
How are you positioned?
Too much cash?
Or too much exposure to stocks?
Ping me and let us know!
Also make sure to watch this week’s LIVE Video Conference Call. This is everything you need to know for the back half of the year.