Steep Drop In Bullish Investor Sentiment

Posted by David Templeton on Thursday, July 30, 2015
Today's Sentiment Survey report by the American Association of Individual Investors shows bullish individual investor sentiment fell a steep 11.44 percentage points to a low 21.1%. The bull/bear spread is now -19.6%. The last time the bull/bear spread was at this level was the early part of 2013. For investors, this contrarian indicator suggests the market could be setting itself up for a move higher after trading sideways for the better part of this year.From The Blog of HORAN Capital AdvisorsS...
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Equity Risk Premium In A Rising Interest Rate Environment

Posted by David Templeton on Monday, July 27, 2015
I have noted in several earlier posts over the years the importance investment professionals place on the equity risk premium (ERP). Although the ERP is one important factor to evaluate, there is quite a bit of disagreement on on how to appropriately calculate the premium. In short though, the ERP is the additional return above the risk free asset an investor requires to invest in stocks. For example, if an investor has a view that the market is under valued and likely to go higher, then one's...
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Weakening Sentiment Negatively Impacting Consumer Spending

Posted by David Templeton on Saturday, July 25, 2015
The IBD/TIPP Economic Optimism Index reported this month continues to indicate weak individual optimism. For July the IBD/TIPP Economic Optimism Index was below the neutral 50% level for the third consecutive month.From The Blog of HORAN Capital AdvisorsIn addition to weakness seen in the TIPP Index, IBD notes, "the Six-Month Outlook Index fell for a third straight month, sinking 0.8 point to 44.5. That's the lowest since last September."From The Blog of HORAN Capital AdvisorsSource: IBDIn July...
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Market Correcting Over Time By Trading Sideways Versus Steep Price Drop

Posted by David Templeton on Friday, July 24, 2015
Since February the S&P 500 Index has essentially traded sideways within a 4.8% trading range. This sideways market movement may be resulting in a trading pattern where the market is correcting over time versus correcting with a steep price drop. A sideways market correction enables earnings to catch up to the market's price. As the below chart shows, several of the technical indicators suggest the future market direction is one where the price could trade to the bottom of this trading range high...
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Neutral Sentiment Investors Are More Bearish Than Bullish this Week

Posted by David Templeton on Thursday, July 23, 2015
An interesting facet of the American Associations of Individual Investors Sentiment Survey has been the recent long streak of an above 40% reading for the neutral sentiment category. This week represents a record 16th straight week with the neutral reading above 40%. Although the neutral reading remains high, this week it did fall from last week's 45.95% to 41.87%. More of these neutral investors have now become more bearish as the bearish sentiment reading increased 2.36 percentage points to 25...
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Investor Letter Summer 2015: Countries/Territories Unable To Pay Their Debts

Posted by David Templeton on Wednesday, July 22, 2015
In our recently published Summer 2015 Investor Letter we highlight issues impacting the market in the first half of the year. In the second quarter the world was not short of market influencing events as Greece, China and Puerto Rico all dominated the headlines.  The second quarter proved to be another challenging quarter partially due to these events and volatility erased much of the year’s gains. However, U.S. economic data was certainly a bright spot as positive reports provide some optimism ...
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Weak Market Breadth But Equity Valuations Not Extended

Posted by David Templeton on Monday, July 20, 2015
Recent market commentary has highlighted the weak market breadth in spite of the equity market's continued move higher. Weak market breadth refers to the technical situation where more equity issues are declining than rising. This weakness raises a red flag in an environment where breadth is negative and the equity market continues to move higher. Below are a couple of charts and article links noting the weakness and subsequent returns when this occurred in the past.From The Blog of HORAN Capita...
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Was Today's Twitter Buyout Hoax An Indication Of An Overvalued Market?

Posted by David Templeton on Tuesday, July 14, 2015
The Twitter (TWTR) buyout offer hoax this morning have some believing this is an indication the market is trading at an overbought level. The thinking is investors are taking trading positions based on rumors versus evaluating company facts and company fundamentals. Mark Hulbert, a senior columnist at MarketWatch and the editor of the Hulbert Financial Digest, published an article late this afternoon, Why the Twitter Hoax Suggests the Market is Near a Top.In the article he notes, " ...investors ...
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Sharp Decline In Investor Sentiment

Posted by David Templeton on Thursday, July 02, 2015
The American Association of Individual Investor's sentiment survey release this morning shows bullish sentiment fell nearly thirteen percentage points to 22.6% The previous week bulls switched to the bearish camp with bearish sentiment increasing 13.4%. The bull/bear spread is now -12.5%. As a reminder, this contrarian sentiment measure can be volatile from week to week and is most predictive at its extremes.From The Blog of HORAN Capital AdvisorsSource: AAII
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Equity Put/Call Ratio Jumps To Near 1.0

Posted by David Templeton on Monday, June 29, 2015
It seems as though the Greece situation has been one that has been ongoing for years and was the cause for today's market decline and jump in the equity put/call ratio to .94 from .54 on Friday. As we noted in a May post in 2012, a spike in the put/call ratio to .99 was partly caused by "the lack of confidence in Europe handling its sovereign debt issues." Nearly three years later the same issues are again challenging investors. For investors, the equity put/call ratio...:...measures the sentime...
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