Bearish Sentiment Approaching July 2009 Highs

Bearish sentiment has now risen convincingly above the levels from February.  According to the weekly survey from Investors Intelligence, 32.6% of newsletter writers now consider themselves bearish, which is the highest level since July 2009 when bearish sentiment peaked out at 35.6%.  Given that the February lows in the S&P 500 have held so far, have investors gotten overly bearish this time around?

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke. 

Comments

[theyenguy]

I ... Well frankly there is much to be bearish about, as Ambrose Evans Pritchard relates in article Spanish Debt Wilts Amid €250bn Rescue Plan Confusion: “Mr Jenkins said it is unclear how the EU would finance a full rescue for Spain. Under the Greek formula, the EU-IMF ratio of aid is 8:3, implying an EU share of around €180bn – with a risk that the sums will escalate. The number of eurozone states available to fund the package is shrinking.

“The issue here is political risk. If they keep bailing out countries, it will mean printing money: that is not going to go down well in Germany,” he said.

Theodora Zemek from AXA Investment Managers said any rescue will have knock-on effects on the credit ratings of donor states. “Germany and France risk going from AAA to AA,” she said.

The original hope behind the EU’s €750bn “shock and awe” headline was that the announcement of such sums would end all doubts about the political solidarity behind the euro project, but nationalist body-language from EU capitals and daily spats between France and Germany have sapped confidence.

What haunts markets is fear that Spain may be the last line of defence. There can be no easy rescues after that because the money will run out. If investors ever start to question Italy’s public debt – the world’s third largest – they may face a sovereign version of the Credit Anstalt crisis of 1931. So far, Italy has remained as strong as a rock.

II … And at the close of trading today Wednesday, June 15, 2010, we wait for a decision as to what the currency traders will do: either call the markets higher or lower with the EUR/JPY. The market decision will be made Thursday, Friday, Monday and Tuesday.

III .. Today, the financially sensitive Russell 2000, $RUT, closed at 666; its ETF, IWM, closed at 66.68; this goes back on the weekly charts to January 3, 2006.

Yahoo Finance shows a close of the euro yen carry trade EURJPY at 112.46.

The lever on stocks of late, has been the euro-yen carry trade. The S&P has been buoyant of the euro-yen carry trade, meaning it has been getting a lift or bounce up from the EUR/JPY. So a move in the S&P, SPY, up from today’s 111.96, will come mostly, from the carry traders going long the EURJPY from 112.46. Likewise, a move down in the S&P will come from those financed by the 0.25% interest Bank of Japan loans, going short the Euro, FXE, relative to the Yen, FXY.

Institutional short sellers should consider entering the Proshares 200% inverse ETFs such as: BOM, BZQ, EEV, EPV, FXP, JPX, SCO ,SIJ, SJH, SMN, SRS, SSG

Also institutional short sells should consider entering the Direxion 300% inverse ETF TMV, which 300% inverse of the 30 Year US Govenment Bonds.

Gold, GLD, is the best means of personal wealth preservation. It is now outperforming silver, SLV, which like the HUI precious metal mining stocks, GDX, have disconnected from the price of gold and fallen lower; this is the natural outcome of the commencing of the process of debt deflation. MSN charting shows that the gold mining stocks and silver disconnected from the price of gold on May, 12, 2010.

I personally am invested in gold coins.

[Advill]

To be very clear....SPAIN HAS NOT A DEBT PROBLEM yesterday they OVERSOLD a € 3.5 billion problem was price, at the same time the "stress test" results of ALL european banks ranked 1st and 2nd place 2 spanish banks STD and BBVA ...by far.

Problem in Spain is unemployment and the socialist politics of the government to deal with that in political not economical terms, but believe me, the President of Spain has the sword in his neck from Brussels even when he is in the bathroom sheeting.