One thing I love about the market is the human nature of it all. Let me explain.
Three weeks ago near the lows, I saw two folks on Twitter practically beating up another for thinking Twitter (TWTR) was near a low. The discussion started out cordially and then escalated when the guy who liked Twitter began to defend it rather strongly. All of a sudden, the Twitter defender was an idiot. Twitter's stock is up over 25% from that point. (Twitter is part of TheStreet's Action Alerts PLUS portfolio.)
Fast-forward to Monday, and the same folks who beat up the Twitter defender jumped all over my case when they praised the chart of Nike (NKE) and I said it's overloved and overextended, even though it hasn't done anything wrong. Now it was clear I was an idiot because, according to them, I had no idea what I was talking about. And worse than that, the fact that I don't think the market melts up into year end has also made me an idiot.
Then there are the folks who are upset with me because I don't think the market is simply going to turn down and collapse from here. To that I say, wait a minute. Haven't we looked at the chart of 2011 before and noted the back-off and re-rally and then two to three more weeks of trading up near the highs before we went back down again? See it again for yourself.
Or the chart of 2001, where we did a lot of back-and-forth -- a 50-point trading range in the S&P -- before we went back up and sat there for weeks before getting clocked for 10%. See it here again.
The market rarely gives us instant gratification, no matter how much we desire it. Folks are not going to turn bullish overnight, not after having been burned in September. But we are seeing the early signs of the turn (see the anecdotal evidence stated above) in sentiment but also in the action in individual stocks. The have-nots that rallied strongly off the lows have been either idle or down for the last two weeks. It's only been a few days, but we are back to the haves rallying and we know that if there are only haves, eventually it weighs on the market.
I can cite that the breadth of the market was negative while the S&P eked out a gain during Monday's trading session, but quite frankly it looked more like a lack of buying than selling. So far, the McClellan Summation Index has shown no signs of turning down, and as long as that is headed upward so are the majority of stocks.
So all in all, sentiment is not yet giddy, but it is heading in that direction. I still think we should see some volatility to the downside this week, but that will likely be followed by another push up. We have to do something to get the bullishness back in full force, and we know there is nothing like a move in price to change their views.
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