Investors Intelligence Bears Hit a 5-year Low
By
Rennie on Sunday, November 29th, 2009 at 5:17 pm
S&P futures recovered from a sharply lower open to finish above the midpoint of Friday’s range, a short-term negative indication for Monday (see intraday update). Friday was also the first session in over three years in which the market closed lower on an abbreviated session. In recent years, weakness on a half day has usually led to a flat-to-down market the following session. See earlier column.
Volume associated with declining issues came in at over 20x volume associated with advancing issues, the sixteenth 20:1 down/up volume ratio since last October. As noted in this early November column, 20:1 down/up volume days were exceptionally rare prior to 2008. Since then they’ve become relatively common, with 10 sessions in 2008 alone and 8 so far in 2009. By comparison, there were only 9 occurrences in the twenty-year period from 1987 through 2006. From a long-term perspective, it would be a much more positive sign if these massively lopsided sessions stopped appearing on such a regular basis.
Volatility indexes surged over 20% during Friday’s selloff. In 20 out of the last 30 instances of a 20%+ rally for the VXO, the S&P closed higher the following session. That’s not quite enough of an edge over random odds for a higher S&P one session later to qualify as a signal.
The latest Investors Intelligence survey revealed a sharp drop-off in the number of bearish newsletters, with only 17.6% falling into the bearish camp this past week. That’s the lowest reading in over five years. Here’s a look at recent instances in which the Bearish Consensus crossed below the 20% level along with the S&P’s performance the next week. Note that in most cases the S&P held within 1.5% of the previous week’s close. In only one case out of the last twenty did the S&P rally more than 1.5% following such a low number of bears…
Investors Intelligence Bearish Consensus Falls Below 20%
11/27/09… S&P500 ??? next week
08/28/09… S&P500 -1.2% next week
10/19/07… S&P500 +2.3% next week (*)
07/20/07… S&P500 -4.9% next week
07/06/07… S&P500 +1.4% next week
06/22/07… S&P500 +0.1% next week
05/18/07… S&P500 -0.5% next week
12/29/06… S&P500 -0.6% next week
08/12/05… S&P500 -0.9% next week
07/01/05… S&P500 +1.5% next week
12/31/04… S&P500 -2.1% next week
06/18/04… S&P500 -0.1% next week
01/16/04… S&P500 +0.2% next week
12/26/03… S&P500 +1.2% next week
10/17/03… S&P500 -1.0% next week
08/15/03… S&P500 +0.2% next week
07/11/03… S&P500 -0.5% next week
06/13/03… S&P500 +0.7% next week
01/24/92… S&P500 -1.6% next week
08/14/87… S&P500 +0.6% next week
01/23/87… S&P500 +1.5% next week
From a seasonal perspective, the first down week from now until the end of the year will most likely represent a buying opportunity. The table below lists each of the last thirty instances in which the S&P posted its first lower bar on the weekly chart during the month of December (no signals were triggered in 1991 or 2003 as there were no down weeks.) Note that in every case but one, the S&P posted a higher weekly close within six weeks and usually within three…
S&P500 Posts its First Down Week in December
12/05/08 Buy SPX 876.07… +0.4% one week later
12/14/07 Buy SPX 1467.95… +1.1% one week later
12/01/06 Buy SPX 1396.72… +0.9% one week later
12/02/05 Buy SPX 1265.08… +0.2% two weeks later
12/10/04 Buy SPX 1188.00… +0.5% one week later
No Down Weeks in December 2003
12/06/02 Buy SPX 912.23… +1.7% five weeks later
12/14/01 Buy SPX 1123.07… +1.9% one week later
12/01/00 Buy SPX 1315.18… +4.2% one week later
12/10/99 Buy SPX 1417.04… +0.3% one week later
12/04/98 Buy SPX 1176.46… +1.0% two weeks later
12/12/97 Buy SPX 953.39… +2.3% three weeks later
12/06/96 Buy SPX 739.60… +1.3% two weeks later
12/15/95 Buy SPX 616.34… +0.1% three weeks later
12/09/94 Buy SPX 446.97… +2.6% one week later
12/10/93 Buy SPX 463.93… +0.5% one week later
12/24/92 Buy SPX 439.77… +2.1% six weeks later
No Down Weeks in December 1991
12/14/90 Buy SPX 326.82… +1.5% one week later
12/08/89 Buy SPX 348.69… +0.4% one week later
12/16/88 Buy SPX 276.28… +0.6% one week later
12/04/87 Buy SPX 223.87… +5.1% one week later
12/12/86 Buy SPX 247.35… +1.0% one week later
12/27/85 Buy SPX 209.61… +0.6% one week later
12/07/84 Buy SPX 162.26… +0.3% one week later
12/02/83 Buy SPX 165.44… +2.3% five weeks later
12/17/82 Buy SPX 137.49… +1.6% one week later
12/11/81 Buy SPX 124.93… -7.6% six weeks later (*)
12/05/80 Buy SPX 134.03… +1.9% three weeks later
12/21/79 Buy SPX 107.59… +0.2% one week later
12/15/78 Buy SPX 95.33… +1.0% one week later
12/02/77 Buy SPX 94.67… +0.0% three weeks later
Investors Intelligence Bears Hit a 5-year Low
By Rennie on Sunday, November 29th, 2009 at 5:17 pmS&P futures recovered from a sharply lower open to finish above the midpoint of Friday’s range, a short-term negative indication for Monday (see intraday update). Friday was also the first session in over three years in which the market closed lower on an abbreviated session. In recent years, weakness on a half day has usually led to a flat-to-down market the following session. See earlier column.
Volume associated with declining issues came in at over 20x volume associated with advancing issues, the sixteenth 20:1 down/up volume ratio since last October. As noted in this early November column, 20:1 down/up volume days were exceptionally rare prior to 2008. Since then they’ve become relatively common, with 10 sessions in 2008 alone and 8 so far in 2009. By comparison, there were only 9 occurrences in the twenty-year period from 1987 through 2006. From a long-term perspective, it would be a much more positive sign if these massively lopsided sessions stopped appearing on such a regular basis.
Volatility indexes surged over 20% during Friday’s selloff. In 20 out of the last 30 instances of a 20%+ rally for the VXO, the S&P closed higher the following session. That’s not quite enough of an edge over random odds for a higher S&P one session later to qualify as a signal.
The latest Investors Intelligence survey revealed a sharp drop-off in the number of bearish newsletters, with only 17.6% falling into the bearish camp this past week. That’s the lowest reading in over five years. Here’s a look at recent instances in which the Bearish Consensus crossed below the 20% level along with the S&P’s performance the next week. Note that in most cases the S&P held within 1.5% of the previous week’s close. In only one case out of the last twenty did the S&P rally more than 1.5% following such a low number of bears…
Investors Intelligence Bearish Consensus Falls Below 20%
11/27/09… S&P500 ??? next week
08/28/09… S&P500 -1.2% next week
10/19/07… S&P500 +2.3% next week (*)
07/20/07… S&P500 -4.9% next week
07/06/07… S&P500 +1.4% next week
06/22/07… S&P500 +0.1% next week
05/18/07… S&P500 -0.5% next week
12/29/06… S&P500 -0.6% next week
08/12/05… S&P500 -0.9% next week
07/01/05… S&P500 +1.5% next week
12/31/04… S&P500 -2.1% next week
06/18/04… S&P500 -0.1% next week
01/16/04… S&P500 +0.2% next week
12/26/03… S&P500 +1.2% next week
10/17/03… S&P500 -1.0% next week
08/15/03… S&P500 +0.2% next week
07/11/03… S&P500 -0.5% next week
06/13/03… S&P500 +0.7% next week
01/24/92… S&P500 -1.6% next week
08/14/87… S&P500 +0.6% next week
01/23/87… S&P500 +1.5% next week
From a seasonal perspective, the first down week from now until the end of the year will most likely represent a buying opportunity. The table below lists each of the last thirty instances in which the S&P posted its first lower bar on the weekly chart during the month of December (no signals were triggered in 1991 or 2003 as there were no down weeks.) Note that in every case but one, the S&P posted a higher weekly close within six weeks and usually within three…
S&P500 Posts its First Down Week in December
12/05/08 Buy SPX 876.07… +0.4% one week later
12/14/07 Buy SPX 1467.95… +1.1% one week later
12/01/06 Buy SPX 1396.72… +0.9% one week later
12/02/05 Buy SPX 1265.08… +0.2% two weeks later
12/10/04 Buy SPX 1188.00… +0.5% one week later
No Down Weeks in December 2003
12/06/02 Buy SPX 912.23… +1.7% five weeks later
12/14/01 Buy SPX 1123.07… +1.9% one week later
12/01/00 Buy SPX 1315.18… +4.2% one week later
12/10/99 Buy SPX 1417.04… +0.3% one week later
12/04/98 Buy SPX 1176.46… +1.0% two weeks later
12/12/97 Buy SPX 953.39… +2.3% three weeks later
12/06/96 Buy SPX 739.60… +1.3% two weeks later
12/15/95 Buy SPX 616.34… +0.1% three weeks later
12/09/94 Buy SPX 446.97… +2.6% one week later
12/10/93 Buy SPX 463.93… +0.5% one week later
12/24/92 Buy SPX 439.77… +2.1% six weeks later
No Down Weeks in December 1991
12/14/90 Buy SPX 326.82… +1.5% one week later
12/08/89 Buy SPX 348.69… +0.4% one week later
12/16/88 Buy SPX 276.28… +0.6% one week later
12/04/87 Buy SPX 223.87… +5.1% one week later
12/12/86 Buy SPX 247.35… +1.0% one week later
12/27/85 Buy SPX 209.61… +0.6% one week later
12/07/84 Buy SPX 162.26… +0.3% one week later
12/02/83 Buy SPX 165.44… +2.3% five weeks later
12/17/82 Buy SPX 137.49… +1.6% one week later
12/11/81 Buy SPX 124.93… -7.6% six weeks later (*)
12/05/80 Buy SPX 134.03… +1.9% three weeks later
12/21/79 Buy SPX 107.59… +0.2% one week later
12/15/78 Buy SPX 95.33… +1.0% one week later
12/02/77 Buy SPX 94.67… +0.0% three weeks later