To start with, the above chart shows the trend for each of the 4 options in the poll (bullish or bearish and based on fundamentals vs technicals). Compared to theequity sentiment poll for last week
this week bullish for technical reasons are back above bearish for fundamental reasons (reflecting what I feel is a widely held view of something like “valuations are high, data is mixed… but the trend is up”). Bearish on technicals has faded with the market recovery, while bullish on fundamentals has continued its gradual downtrend.
Looking at the overall bulls-bears spread, it improved slightly again this week and is back above 0, but the recovery has been muted and mirrors the not quite complete rebound in the S&P500. Negative seasonality is cause for technical caution, while the fundamental bears are likely focused on high valuations, mixed economic data, and election uncertainty/political risk.
Below are the 4 supplementary charts showing the bull bear spread specifically for “fundamental analysis” rationale and “technical analysis” reasoning. Also included is the technicals vs fundamentals spread (a gauge of whether technicals or fundamentals are driving the predominant view), and for good measure the number of respondents.
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The most notable standout is the steady decline in the fundamentals bulls/bears spread, this reflects both a decline in bulls and increase in bears. It is interesting that this indicator had been declining into the recent selloff. If this is representative of the wider sentiment (which I think it is) then the market is setup to be surprised if the fundamentals improve.
Bottom line:Overall sentiment improved slightly on the week – driven by technicals, but deep skepticism remains on the fundamentals.