The Week Ahead: What Action Should Investors Take in February? |
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January 31, 2016 |
January 2016 Bond Updates
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After a choppy week of trading stocks closed the week strong adding to the evidence that the upside reversal on January 21st was important. The surprising drop in bullishness the previous week (Is Bullishness Low Enough Now?) did not get the attention of most analysts even though it was making a ten year low.
According to AAII the bullish% rose to 29.75% last week after hitting a low of 17.9% on January 14th. The bearish% is back to 40% as it dropped 8.7% last week. The long term bullish average is 38.7% so a gradual rise back to this level would not be surprising.
The recent firming in stocks prices has not changed the bearish outlook of many analysts which is not surprising. Students of the markets may find last week's article "Learning From Past Bear Markets" informative as typically bear market rallies, as was the case in 2008, cause many of the bears to change their tune just before the market decline resumes.
It is still my view that the current market rally will determine whether we have just seen a market correction or the start of a near bear market. There are no convincing signs yet of a recession based on the economic data and most bear markets have coincided with recessions. This has some bearish markets calling for an "earnings recession" where a continued trend of weak earnings and revenues push stocks into bear market territory. Should investors take action this month?
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View more at: http://www.forbes.com/sites/tomaspray/2016/01/30/the-week-ahead-what-action-should-investors-take-in-february/
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