Weekly equity sentiment poll (19 Sep 16)

Weekly equity sentiment poll (19 Sep 16)

The weekly equity sentiment poll (as a reminder it distinguishes between bullish and bearish on equities for fundamental vs technical rationale) has been running for 12 weeks now.  With the market action of the past couple of weeks it has also now gone through its first sizable market correction/selloff, and the results are interesting…

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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 the equity sentiment poll for last week this week the bulls have tentatively come back, while technical bears have retreated somewhat – albeit bearish for fundamental reasons continues to track higher and the trend of bearish for technical analysis reasons seems to be in an uptrend.

Looking at the overall bulls-bears spread, sentiment has rebounded slightly along with the market. For traditional sentiment analysis this is the typical pattern you would expect to see for a market bottom; i.e. an extreme pessimistic reading, followed by an improved reading.  Given most trend indicators remain positive for the S&P 500 this is probably a good indication of a short-term market bottom. This lines up with some of the findings in yesterday’s S&P500 #ChartStorm.

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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.

The standouts are the gradual downtrend in the fundamentals bull-bear spread, but note it was unchanged on the week.  Also, the technicals bulls-bears spread rebounded after its lowest reading yet. On the technicals vs fundamentals spread, fundamentals seem to be taking charge as the predominant driver of investment reasoning.

Bottom line: The equity sentiment poll overall showed a mild uptick in bullishness compared to the more pessimistic readings of last week; this could be an indicator for a short-term market bottom.

FYI: I’m also trialing a bond market version of this survey, which is on its 2nd week now – will add charts and analysis from the bond survey after we get a bit more data.

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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.
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