Why Bullish Investors Could Be The Death Of This Stock Market Race


We received a lot of joy on a Friday and we can thank China for some of that.

Thursday's data on US growth, better than expected, from the world's second-largest economy, was bolstered by an optimistic survey of the manufacturing sector, easing some concerns about a global economic meltdown, at least for now. We also showed greater optimism about the conclusion of a trade agreement between the United States and China, after a Bloomberg report said that an agreement could be signed in the coming weeks.

And while the week was not a great week for equity investors, March is a good start, which could keep the momentum up.

Nevertheless, some people can not help but think that everything is maybe a little too great for the moment. Our call of the day Tim Knight of Slope of Hope says investors should watch their fellow investors, who are apparently so optimistic that they could get the second best start for stocks since 1987.

In a new blog post, Knight zooms in on the "warning signs" of the latest AAII Sentiment Survey, which measures the number of equity investors who are bullish, bearish and neutral. "The bullish force is now above level 40 – which usually marks market reversals. The downward trend has collapsed, "he notes.

Results of the IIA survey for the week ending 28/02/2019

Knight collects the chart (below) that shows a recent history of the S & P 500's behavior, when the percentage of bullish investors exceeded 40% and the bearish dropped below 30%. Levels above 40% preceded withdrawals in early October and November, although the early December sentiment is around 38%.

That does not mean, of course, that history repeats itself, says Knight. "It does mean, though, that we should be careful. It is possible that we can burn these high readings and go higher, but the chances do not encourage it, "he adds.

The last word comes back to Bank of America Merrill Lynch's "Flow Show," which takes the weekly pulse of what investors have prepared. Their own indicator, the Bull & Bear Indicator, has reached 5.1 in the last week (up from 4.9 last week), its highest level since May 2018. The scale ranges from 0 – extreme bearish – to 10 – extremely bullish .

In searching, the thirst for actions does not seem so hot, though. The bank reported that $ 6.5 billion had been paid into bond funds (for the week ended February 27), while the shares recorded cash inflows of only $ 300 million, of which $ 10.2 billion in exchange-traded funds, but $ 9.9 billion from mutual funds.

Bank of America's Merrill Lynch Bank added that stock buying has been largely focused on growth stocks and not on value – undervalued companies that can offer long-term profits if you do your homework .

The quote


Bill Gross says it all

"I'm an Asperger and the Aspergers can compartmentalize, they can work in different universes, the other universes do not affect them as much," said Janus Henderson's portfolio manager, Bill Gross, in an interview with Bloomberg. He says he became aware of his own diagnosis after being identified with one of the heroes of Michael Lewis's book, "The Big Short."

But the developmental disorder also helped him as a trader, allowing him to "focus on things in the longer term without getting lost in the details".

Mr Gross also said that he was transmitting his crown 'bond king', it would not be to Jeffrey Gundlach of DoubleLine Capital, but to Scott Minerd, investment director at Guggenheim Partners, for his 'big prospect' long term. "

The market


YMH9, + 0.71%

, S & P 500

ESH9, + 0.64%

and Nasdaq

NQH9, + 0.73%

Futures contracts rose after Thursday's session, which was marked by modest losses for the Dow Jones.

DJIA, -0.27%

, S & P 500

SPX, -0.28%

and Nasdaq

COMP -0.29%

Risky mood not helping the gold

GCJ9, -0.58%

while the dollar

DXY, -0.02%

is flat and gross

CLJ9, + 0.26%

is progressing.

Hopes of trade agreements have lifted European stocks

SXXP, + 0.61%

and Asia. The Shanghai Composite

SHCOMP, + 1.80%

Trade flows jumped 1.8% and, after the index of manufacturing purchasing managers Caixin China, rebounded to reach its highest level in three months in February. This comes one day after the official tonnage has fallen to its lowest level in three years.

Lily: 3 tips to beat the stock market of a fund manager who continues to do so

L & # 39; s economy

Another massive data dump is about to arrive, with a series of indicators that had been delayed because of the shutdown. At 8:30 am, we will have personal income and consumer spending for December and January, core inflation for those months, then the Markit Purchasing Managers Index, the Institute for Supply Management Manufacturing Index, construction spending and consumer confidence.

Auto sales are also heading towards us

Read: Dudley, Fed, says the central bank is too blamed for the ups and downs of the market

The stat

Getty Images

A piece of China's action

$ 66 billion – This is the amount of foreign capital inflows that could affect China later this year after MSCI announced that it would increase the inclusion of Chinese large cap stocks from 20% to 20%. The announcement comes as the region's shares are booming, with the Shanghai Composite recording a 20% rise since the beginning of the year and a dominant position in currently winning the global stock indexes.

Nicolas Yeo, head of Chinese equities at Aberdeen Standard Investments, told CNBC that the region was a "basket case". "It's an inefficient market, after all, where 80% of the revenue comes from local retail investors more easily influenced by the latest news than by the earnings outlook of the stock companies," he said.

Atlas Investor's Tiho Brkan, which focuses on investing in Asia, told MarketWatch that it had left Chinese equities three days ago, "precisely because the stock market had become vertical," after about five weeks. "… I've learned that when prices go up so fast, it's always smart to sell and buy when the situation subsides," says the trader.

The buzz

You're here

TSLA, + 1.63%

Chief Executive Officer Elon Musk said the company would not make any profit during the quarter, but said the target was "likely" in the second quarter. He also announced job cuts as the company decided to sell its cars online and close several of its stores, adding that it was the only way to provide cheaper cars.

Flying high is Gap

GPS, + 0.16%

After the news, the company will split in two, with a spin-off of the Old Navy franchise. Foot Locker

FL + 0.25%

also climbs on the gains of the eruption.


DELL -0.76%

recorded losses that doubled in its first set of gains – warning, you will need a Mr.B.A. to understand them – since returning to Wall Street. Also late Thursday, Hewlett Packard Enterprises

HPE, -1.92%

delivered a profit beating, with VMware

VMW, -2.39%

and Nordstrom

JWN, + 0.04%


Flying high is Gap

GPS, + 0.16%

After the news, the company will split in two, with a spin-off of the Old Navy franchise.

Opinion: Best Buy and other physical retailers that are worth buying in 2019

Random readings

North Korean media paint rosy picture of Trump-Kim talks

Pakistan is preparing to release the Indian capture pilot, in hopes that tensions will subside

Against the CIA, Trump reportedly gave a secret security clearance to his son-in-law Jared Kushner

The United States is offering $ 1 million for information on the son of the late brain of al-Qaeda, Osama Bin Laden

Australian winemakers worry about the heat that burns in the vineyards

Multi-tasking, bow to your new queen.

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