We’ve been correctly positioned near our tactical portfolios’ equity minimums, yet we’re oddly compelled to use this month’s “Of Special Interest” section as a very public second-guessing of that move.
This month’s “Of Special Interest” allots eight pages to the (opposition) view that the correction is over, featuring charts we find the most threatening to our bearish stance. Based on its sudden popularity among the press and punditry, the indicator in this chart—highlighting the air-pocket in investor confidence—perhaps should have been part of that feature. Here’s why it wasn’t.
The U.S. stock market has largely shrugged off the latest round of worries related to China’s stock market collapse, the new down-leg in crude oil, a more hawkish tone in Fed-speak, and sizable second-quarter declines in S&P 500 sales and earnings.
The Volume Oscillator discussed in this section is one of several encouraging developments within our Attitudinal work that has sent that category to its least negative reading (-57, Chart 1) since July 2013.
Stock market sentiment is overheated, at least on a short-term basis. But does excessively optimistic market sentiment lead to worse September-October market action? Yes it does, but the observations are limited.