Two weeks ago, on this very page, I addressed the calls for a new bull market, noting that I will have no idea until well after the fact if it is a new bull market. At the same time, I also noted that whether it was a new bull market or not this was a different environment than most were used to. Stocks had some competition from bonds.
I noted that even in the bull markets of the 1980s and 1990s, stocks went up, but rarely in a straight line. Why? Because when folks felt stocks had gotten ahead of themselves, they could park that money in bonds and get paid, risk free. The entire 2010s did not have that same environment.
Fast forward to today. The S&P 500 is 200 points lower than it was a few weeks ago. Now no one asks me if it is a new bull market. Now the questions I get center more on "how low do I think we're going?"
And then there are the folks who now want to lecture me, because don't I know that there is competition for stocks and they can get risk free 4%-5% in Treasuries? So, yes, that tagging of 4% on the Ten Year Wednesday might not have brought about the hysteria I imagined it would, but surely we are edging much closer to a "Realization Day."
A Realization Day is when folks finally realize why a bond or stock or currency has moved. Now there is a narrative to attach to it. Four percent risk free!
But isn't that why we've come off the highs in the last month? Isn't that why we've seen that 10-day moving average of the put/call ratio climb from under .90 to 1.04? We looked at this chart yesterday, and I said think of the blue line as a sentiment indicator: When it goes down, folks are getting more bullish. When it goes up, folks are getting more bearish.
Or we can look at this week's Investors Intelligence bulls, which fell six points to 38.4%. The bears only rose a bit over two points to 28.8%, though.
This is of interest, though. The correction-minded folks who Investors Intelligence define as bulls looking for a correction, jumped. What I have observed if that they tend to jump midway through a decline, but near the end of the decline they tend to exit the Correction camp and jump to the bear camp.
Let me finish off by noting that the Daily Sentiment Indictor for the bonds dropped to 20. So we might not have gotten much in the way of hysteria (not yet!), but this indicator is moving in the right direction, toward too much bearishness for bonds.
