By: Chris Rowe — November 24, 2018
Is the bull market over or are we going through a long-overdue digestion of a parabolic price advance?
Here's this week's market analysis:
When it seems that everyone is predicting the same thing, such as "we are going into a bear market", it's usually the wrong prediction.
That isn't some high level, sophisticated analysis. But market analysis can be pretty simple and is overly-complicated by those who are paid to sound superior.
My job is to help you think about the market the right way.
Let's take a look at one key market indicator - The most reliable sentiment indicator out of all: The Investors Intelligence Advisor Sentiment Index.
Each week, since the 1960s, Investors Intelligence has been publishing the results of a poll that they conduct, asking investment advisors whether they're bullish, bearish or waiting for a correction to buy more.
Last week, only 39.6% reported being bullish, which is the lowest reading of the year and the fewest bulls since May 2016. The bulls are scared!
That reading is a far cry from the record-breaking 66.7% registered as bullish, in January, 2018. That level was literally off the charts (above), at a high not seen since April 1986.
So what does this current low reading tell us?
The bearish trade is a crowded trade. And this contrary indicator suggests a great buying opportunity (even if prices do go much lower in the short-term, they'll likely have a very strong recovery and I'll prove this to you).
During bull markets, when the percent of bullish advisors had declined below 40, it has been a great buying opportunity.
During bear markets, when the percent of bullish advisors had declined below 40, it has also been a great buying opportunity.
The reading declined significantly below 40...
The biggest investors in the world - and I mean the people you don't hear about in the news... I mean the people who control the global financial system - are currently positioned for a continued risk-on market.
It's easy to see which assets are being bought heavily and which are being sold.
The risky assets are in demand and the safe havens are absolutely out of favor.
In the fixed income market, for example, Treasuries are currently the weakest (out of favor) and risky Junk Bonds are the strongest (most in demand).
In international equities, it's the emerging markets in both Europe and Asia that are in demand with weakness in developed Europe and Asia. Even the currencies of the emerging countries are stronger than that of the developed countries.
And in general, global stocks are strong while fixed income securities are weak.
So even if something happens to the U.S. stock market that causes the bulls to run scared, bringing the percentage of bullish advisors sentiment well below that 40% range, it should be viewed as one of the greatest buying opportunities you'll ever see.
Let's consider these sentiment readings in conjunction with another powerful indicator.
It's one that I've been showing you lately - most recently in a video I made when we were at the fist stock market low, on October 26th.
But this time, I added circles where, on the sentiment chart, "bullish sentiment" was significantly below 40%. Compare the two charts.
For your convenience, I also numbered these matching areas at the same points as in the Advisors Sentiment Chart.
This breadth indicator ("the %30-week") shows you how oversold or overbought the market is. Forget the confusion conveyed by the major market averages like the S&P 500. Instead, this indicator oscillates between 0 and 100, making it nice and simple.
The blue arrow points to the current reading. It shows that, just like in the past, when sentiment gets this bearish (lack of bulls), markets tend to be way oversold. Listen to this indicator because this is a True Market Indicator.
I'll pause here for a second for a side note about this important technical indicator:
Here at True Market Insiders, we teach you to stop seeing the stock market the way the P.O.S. financial media wants you to see it. They want you to think "bull market" or "bear market".... "up" or "down"... and they want you to focus on popular market averages like "the Dow", "the S&P", "the Nasdaq" etc. It's a bunch of smoke and mirrors.
Instead, think of the market as "overbought" of "oversold". That's how the guys, who are taking your money from you, are always thinking about it.
The powers that be - the guys who are scaring investors out of their stock positions at low prices right now as they accumulate that stock for themselves at low prices - they absolutely love the con-job the media and investing industry are doing. But instead, the chart, above, shows you "The True Market".
The "%30-week" gives us the truth about the stock market.
As you can see, only 18.61% of stocks on the NYSE are currently trading above their 30-week moving average. That means 81.39% are trading below their 30-week moving average. That's an incredibly oversold reading.
Throughout history this has been proven to be a terrible time to sell and a great time to be a buyer.
So while the talking heads are pointing to the popular stock market averages, calling the next bear market, as this indicator sits at a major low, it doesn't even matter whether they are right or wrong. That's the wrong thing to focus on.
Of course they'll be bearish at this point.
The sentiment readings as well as the %30-week can't possibly get this low without the majority of these clowns calling the next bear market. It's the same story every time we reach these oversold levels.
OF COURSE everyone's going to be shouting "the sky is falling".
When these indicators do get this low, it's almost always a great time to step in and buy for the long-term...
...and pretty much always a great idea to buy for an intermediate-term gain even if it IS the beginning of the next bear market.
In September of 2001, after the huge market selloff post-9/11, it was a great time to buy for a few months
If we go lower for another month or so then so be it. Everything I'm currently seeing points to a very strong recovery in the coming 12 - 18 months.