Weekly equity sentiment poll (26 Sep 16)

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 weekthis 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.

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.