Are Those With $666 Billion AUM Wrongly Positioned Again?

There have been technical indicators on January 6^th after the discharge of the December Job report that the sturdy rally “was something different” . That was regardless of the gloom and doom outlook from many Wall Avenue strategists.

A majority {of professional} analysts have been preventing the market rally because the begin of the yr. The skepticism has been supported by the inventory market’s uneven upward path as there have been a number of sharp downdrafts which have helped hold investor sentiment low.

Within the newest survey from the American Affiliation of Particular person Buyers (AAII), solely 22.9% anticipate the S&P 500 to be increased in six months. In 2023 there have solely been 4 readings above 30% with the height studying of 37.5% simply earlier than the February correction. The long-term bullish common is 37.5%.

From final week’s survey, 39.7% have been bearish with 37.4% impartial. Each of those readings are above the long-term common.

It has been my view because the progress worth ratio bottomed in January (see chart) {that a} growth-led rally would take the S&P 500 to the 4200 stage and certain increased.

Over the previous two months, this view has been additional supported by the April information that enormous speculators had amassed a historic quick place within the S&P futures. As reported by Bloomberg, massive speculators had the biggest quick place within the E-mini S&P 500 futures since November 2011. That was just some months after the downgrade of US debt and a Zweig Breadth Thrust buy signal.

Frankly, I’ve been searching for a brief squeeze since April however essentially the most present information signifies that the quick place remains to be fairly excessive. This might be altering as on Friday the S&P 500 had a excessive of 4212.9, line b, however then closed at 4191.98. The failure to shut strongly above 4200 has doubtless saved some from protecting their shorts.

It’s going to doubtless take a sustained transfer above 4200 or 4250 earlier than they get nervous. The August excessive at 4325 is a extra vital resistance stage.

The technical readings haven’t been sturdy sufficient but to point upward acceleration. For the week the NYSE A/D numbers have been optimistic with 1814 advancing points and 1320 declining. The day by day S&P 500 Advance /Decline moved above its MA on Thursday however closed again under it on Friday.

A transfer above the early Might after which the August excessive, line c, is required to verify a serious push to the upside. That is nonetheless the favored state of affairs however for now, the day by day S&P in addition to the NYSE A/D traces are nonetheless in short-term downtrends. For the S&P the important thing assist is on the uptrend, line d, after which the March low.

The technical outlook for the NYSE Composite and Dow Jones Industrial Common has been the weakest up to now this yr as indicated by the efficiency chart. They’re up simply 0.92% and 1.4% respectively YTD. That is in step with the expansion/worth trends analysis that has favored progress all yr. The Nasdaq 100 is up 26.2% YTD with the SPY
PY

SPY
up 7.1%.

In a evaluation of the October 2022 BofA’s survey of huge cash managers the Financial institution of America
BAC
funding strategist Michael Hartnett commented “Sentiment [is] nonetheless uber-bearish,” pointing to excessive ranges of money, the bottom allocation to tech shares since 2006. A better studying of the report exhibits they have been additionally chubby in power which was a price play.

Within the latest survey of 251 contributors with $666 billion beneath administration reveals they’re nonetheless very bearish however now are chubby know-how shares. That they had “ the largest two-month enhance because the world monetary disaster and being lengthy huge tech is essentially the most crowded commerce”.

Additionally “Buyers are the longest progress versus worth shares since July 2020.” That is just about the alternative of what they thought in October 2022.

The Invesco QQQ
QQQ
Belief (QQQ) gained twice as a lot final week because the Spyder Belief (SPY) and closed above its day by day starc+ band. The weekly chart additionally seems a lot stronger because the resistance going again to the beginning of the yr, line a, was overcome. The shut was additionally above the 50% retracement resistance from the late 2021 excessive at $331.36 with the 61.8% resistance at $349.61.

The weekly Nasdaq 100 Advance/Decline line has been above its WMA since March and rose additional final week. As well as, the day by day Nasdaq 100 A/D line was in a position to escape above the downtrend I identified final week (see chart).

Through the years I’ve discovered the BofA’s survey to be very informative and may usually be a very good opposite indicator when you use your individual timing indicators. For instance, the survey was extraordinarily bullish on crude oil in Might 2022 however crude peaked at $123 in June because it gave a weekly doji promote sign on the highs.

I feel there’s a likelihood that the current heavy tech shopping for and liquidation within the worth shares is more likely to end in a swing again in favor of worth as we head into the summer time. One other of essentially the most crowded trades from the most recent survey was quick banks.

There are not any indicators but of a prime in tech or a backside in worth shares however there may be some FOMO in tech which frequently is an early warning of a prime.