Friday, April 14, 2017

Should we sweat slumping optimism?

The market action lately has been, as always, interesting. I've stated herein numerous times how a market in bull-mode can shrug off a lot of issues that might otherwise send it reeling.

Considering all that's occurred (I'm assuming you don't need a list) of late, I'd say that the stock market has held up relatively well. So, yeah, nothing in terms of recent market action would have us questioning the prevailing trend.

That said, it does appear that the party is quieting down a bit -- considering, for example, yesterday's 1+% decline in financials in the face of what on balance was pretty decent earnings news:    click to enlarge...


So should we sweat a slump in optimism? Well, it depends on the setup.

Here again is a look at the last super-good year for U.S. stocks, 2013; note the draw downs throughout the year:



Note the 200-day moving average (blue line) steadily signaling a sustainable uptrend.

Here's with year-to-date 2017 in the top panel:



No -- vis-√†-vis the 200-dma -- long-term trend worries at this point.

However, worry does seem to be finding its way into the hearts of individual investors:



Only 29% in the latest weekly survey are feeling good about the market these days.

Here's how it looks on the chart:



Here's throughout 2013:



Notice how at this time that year (the circle) individual investors were -- at merely 19% bullish --feeling quite gloomy -- to put it mildly.

So, am I at all suggesting that 2017 will be the market's next super-good year, and that waning optimism at this juncture strengthens the case? No, actually, not at all! What I am suggesting is that getting bound up over headlines and market volatility, or, worse yet, using them as a basis for investment decision-making can be hazardous to your (the stress) and/or your portfolio's long-term health.

Click here for a more in-depth look at this and other sentiment indicators we track...

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