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Looks like the “Power of the Pattern” is influencing IEF (Govt. bond ETF). Suggested to buy the inverse bond ETF (TBF) in this chart (see post here) since yields were testing a 17-year support line, along with a bullish falling wedge. The prior chart reflects yields on bonds, this chart reflects prices, which looks to be breaking down after hitting several resistance points at (1). Keep a 3% trailing stop in place!
P.S. if any of you are reading this blog and driving….that is dangerous too!
Mike,
Which last line are you referring too?
better be careful, driving and reading my blog…you might spill not coffee you know where!
FYI-I bought liability coffee coverage just in case! 😉
chris, ahahah, last lines are for me, but I’m reading in the sofa this time. But I’m usually too curious to reed your posts. Ciao. Mike
Mike…Well said!
I have seen a study that reflected the following…in the mid 1960’s, the majority of investors portfolio was invested in stocks…around 60%, highest in history (to date)… then the sideways market from the late 60’s to 1980’s took place.
What happened to that large equity exposure? It tanked, down to below 20% (1982 levels)! Now move forward to the year 2000…how much of a portolio did stocks represent? More than what we saw in the mid-1960’s!!!
It took almost two decades (mid 1960’s to early 80’s) for sentiment extremes to play out (too many bulls/to very few bulls)…with that in mind, if 2000 represented a “bullish sentiment extreme” when will the opposite finally take place???
It is this shift, that Sir John warned me about in the late 90’s that has me a huge fan of technical analysis. Patterns/TA is a “GREAT SOLUTION” to this VERY NATURAL UNWINDING PROCESS!
We live in a time of MASSIVE ABUNDANCE if people would just look for “solutions!” The tools/answers are right in front of most investors faces!!! 🙂
Times are GRRRRRREAT!
I don’t think most professional money managers have any sort of monopoly on insight. I remember being one of those bears in March of 2009. I don’t remember getting a call from a stock broker saying now was the time to buy. As I recall, everyone thought the world was about to come to an end. Who can blame 401K holders for being cautious? If we teach our children to plan on receiving only 3 to 4% on their money safely put away in 30 year Treasuries and alerting them that they must count on only that source of growth, how have we harmed them? If they must feel like they are not getting the return they could, advise them that risking only 10% of their pile could be used to gamble in the market. But they should be prepared to lose it all, just as we advise them when they head for Las Vegas.
Chris,
I don’t see the outflows and bullish sentiment as really contradictory. The AAII is obviously surveying active, amateur traders, and the are offering a proportional scale that really tells you nothing of the size of the sample. I imagine, there were a lot more people in this category in 1999 than now.
But the average 401k holder is not an active investor, and is pretty jaded by now. The funds they are offered often have all sorts of trading restrictions, often high fees, and usually few choices.
And keep in mind that the money in these is held disproportionately by the oldest workers and retirees. The days of 65-year-olds having 80% of their money in equities are over.
The cult of equities may not be dead, but it’s definitely dying… 😉
Bob,
Not off topic and Thank you for sharing! Actually I am surprised that the number of bulls is this low.
September was one of the biggest up months in decades and what happened with cash flows during that time? Redemptions in stock and in-flows towards bonds.
When was the last time a major top took place, when mom and pop were pulling moneys from an asset class? The cash flows don’t mean a ton I understand…I just find some things from a sentiment angle interesting.
Bulls outnumbered bears for what 5 YEARS in the late 90’s…I love sentiment, yet for me, I haven’t had luck making money by sentiment alone. Others yes…Me I need more tools.
Sorry, a little off-topic, but the AAII sentiment reading you reported at the August low is now 51% bullish, 21.6% bearish. From what I can tell, that’s the lowest bearish reading in two years.
This guy has some charts tracking SPY and this sentiment gauge:
http://chartsgonewild.com/2010/09/02/looking-at-the-aaii-bullish-neutral-bearish-readings-from-2009-present/
It does kind of illustrate that this mostly tells you the market has recently gone up/down. Though the current euphoria still seems a little hard to explain.