Sentiment indicators have yet to show signs of extreme pessimism during the Standard & Poor’s 500 Index (SPX)’s retreat since April, suggesting there is still room for bears to push the market lower, according to UBS AG.
While the proportion of newsletter writers who said they are bearish on equities rose to a two-month high of 26.6 percent last week, it’s still below the peak of 46.3 percent reached in October, when the S&P 500 hit its 2011 low, according to data from Investors Intelligence compiled by Bloomberg. The New York Stock Exchange Short-Term Trading Index, a volume-based market breadth indicator, reached a 2012 peak of 2.52 last month, failing to break 3.0, a level that Michael Riesner and Marc Mueller of UBS consider a sign of capitulation.
“The missing panic sell-off and the low levels of bearishness are suggesting that we still have a high level of complacency in the market…”
We may be skating on very thin ice here, but the weight of the evidence still supports a weak bull case for the near to intermediate term. So I’m adding buy picks on the chart pick list and adjusting trailing stops to account for the risk.
These reports are not investment advice. They are for informational purposes, for a broad audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance.