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Urban Carmel Profile picture
@ukarlewitz
May 28, 2020 • 266 tweets • >60 min read • Read on X
Sentiment round-up
Bearish (-1): AAII, fund flows, BAML FMS
Bullish (+1): II, Panic/Euphoria, DSI, 10-day CPCE, one-month CPCE, NAAIM
Neutral (-1): Fear & Greed, Consensus

1 more measure moved up into the bull camp this week
10-day equity-only put/call now at 0.53. Since 2004, a >5% drawdown was ahead, or if $SPX ran higher, all gains given back. It could take weeks to unfold Image
Sentiment round-up
Bearish (-1): 4-wk AAII, fund flows, BAML FMS
Bullish (0): II, Panic/Euphoria, DSI, 10-day CPCE, one-month CPCE, NAAIM
Neutral (+1):1-wk AAII, Fear & Greed, Consensus

No big change from last week but CPCE, DSI and NAAIM have gone through the ceiling
Would now be a good time to point out that equity ETFs + MFs had $4.6b in outflows in the past week? $30.5b outflow in the past 5 wks
https://t.co/OdNwuWC5PI
Consensus Inc still bearish
https://t.co/XVna7zgvwO
$CPCE = 0.37 today. That’s about n=4 in the last 4,160 trading days Image
10-d avg $cpce = 0.47. N=1 in 16 yrs (April 2010)
Would now be a good time to point out that equity ETFs + MFs had a massive $20b inflow in the past week?
BAML: fund managers in June are still overweight cash and bonds and underweight equities. Within global equities, they’re hiding in the US. This is defensive positioning Image
The only time since 2003 that either 10-d or 21-d $CPCE has been lower than today was mid-April 2010 $spx
Woah, massive $25.5b outflow from equity ETFs + MFs in the past week (Lipper) $spx
II Bull/Bear ratio back over 3x (3.2x) for the first time since late January. It was just 0.7x at the low in late March. That’s how this works
Sentiment round-up
Bearish (+1): 4-wk AAII, 1-wk AAII, fund flows, BAML FMS
Bullish (-1): II, Panic/Euphoria, 10-day CPCE, one-month CPCE, NAAIM
Neutral (0): Fear & Greed, Consensus, DSI

Two wks ago, CPCE, DSI + NAAIM through the ceiling. CPCE still is, DSI now neutral
Today's $CPCE (0.74) the highest since May 1 $SPX
Equity MF + ETF fund flows positive into $SPX peaks in 2000, 2007 and 2015. Now, negative flows the past 4 quarters (unprecedented). Small sample but negative flows have corresponded to future $SPX gains. From JPM Image
Do fund flows contradict $CPCE and DSI for $COMPQ? Yes. Could be a short term (next month) vs longer term difference
$NDX $CPCE in the basement, normally (but not always) spells trouble before too long. From MKM Image
Huge equity MF + ETF inflow 5 weeks ago marked the exact recovery high in $SPX so far. Equity outflows every week since, but they are lessening (from Lipper) Image
Instead of breadth, I’d keep two eyes on this. Pretty consistent pattern after getting into the basement. Last 4 days avg of 0.43. Took a little more time in 2011 $cpce $spx Image
google.com/search?sxsrf=A…
Sentiment (like Panic/Euphoria) works well at lows, not as well at highs, e.g., last Sept/Oct, March this year.

We’ve been through this many times before:
Sentiment indicator for annual gains (not next weeks or months) $spx
BAML: fund managers in July are still overweight cash and bonds and underweight global equities. Within equities, they’re still hiding in the US. Neutral EU and EM.

Overall, this is defensive positioning Image
When BAML FMs’ equity is exposure is this low, stocks generally do well, with one massive exception Image
BAML FMs’ have usually been right about the $USD; when they thinks it’s overvalued, it has mostly lost value. Image
Shorter term, one-month $CPCE back in territory where $SPX can go higher but has, in the past, always given those gains (and more) back. Like mid-Jan and end-May of this year Image
Two-week $CPCE: same conclusion, but sometimes more lag $SPX Image
II bull-bear spread back above +40 for the 1st time since late Jan. Two misses (green arrows) but most often, gains given back if $SPX keeps moving higher (red arrows) Image
Sentiment round-up
Bearish (0): 4-wk AAII, 1-wk AAII, fund flows, BAML FMS
Bullish (+1): II, Panic/Euphoria, 10-day CPCE, one-month CPCE, NAAIM, DSI
Neutral (-1): Fear & Greed, Consensus

One guess is short term bullish sentiment extreme, but longer sentiment tailwind
Like AAII, Consensus is not showing a bullish extreme in sentiment $spx
https://t.co/WBkoWJ3SfB
Margin debt on the sidelines Image
$21b MF + ETF equity outflow in the past 5 wks (Lipper) Image
Useful buy signals; not so much for sell signals. Scroll up for more
Meanwhile NAAIM (active investors) is now +100, i.e., leveraged long, for only the 8th time in its short history. 2 winners and 5 eventual losers but a very small sample size $spx Image
If you prefer ‘real money’ measures of sentiment, here’s one: after pulling $21b OUT of equity funds since early July, +$5.7b came IN this past week (Lipper)
One month $CPCE turning up from the lowest level in >20 years (lower panel). At the point where more put buying is usually (but not always) bearish $spx Image
I’d pay more attention to the last 2 charts from today than the ones having to do with Greenwich meridian, but to each his/her own and the more things line up, the more noteworthy
BAML: fund managers rotated into equities and out cash and bonds in August (top). Within equities, they’re overweight the US (bottom)

Overall, they are no longer bearish, but not yet outright bullish, i.e., they’re neutral Image
Not everything is necessarily contrarian. BAML fund mgrs maro optimism in 2003, 2009 and 2014 preceded much higher prices. 2002, not so much (circles) Image
Fund manager global equity exposure has risen but is certainly not high (low end of neutral). Stocks generally do well Image
Exposure to US equities otoh is high; the region tends to underperform. The US is the global safe haven, so rotation into riskier regions is normal Image
Sentiment: meanwhile, the AAII 4-wk avg bulls minus bears is still buried at -19%, same as a month ago, with $SPX 5% higher
Sentiment:
Sentiment: NAAIM hits 107, 2nd highest in its history. Active investors leveraged long equities. Dec 2017 only reading higher. Image
If you wanted to ignore one of the many sentiment readings, I’d make it NAAIM. Shortest history and the other ones are more meaningful. jmo
Meanwhile, the much derided AAII 4-wk avg bulls minus bears spread remains buried (at -14) for the 23rd week in a row, at the same level as 2 months ago w/ $SPX >10% higher. It works
Money has flowed OUT of MF + ETF equities 4 of the past 5 wks by a net -$20b (Lipper) Image
$CPCE 0.39 yesterday and 0.38 today. Last 15 years, it has been under 0.4 two days in a row once: April 14-15, 2010
Sentiment: Consensus Bulls at 61%. Past 9 years, $SPX hasn’t run into trouble until it was over 70% (circles). h/t @hmeisler Image
Sentiment: Citi’s Panic/Euphoria hasn’t been this excited since 1999-2001. $SPX can go on but something naughty is ‘eventually’ ahead h/t @high5racing Image
Sentiment: Greed at the level where $SPX can trip (red circles), but some big exceptions in just the past 3 years (blue circles). Fear, otoh, is pretty good at marking lows (arrows). That’s the way sentiment works (scroll up) Image
Sentiment: an older Fear & Greed chart (2012-2015) shows the same thing: that 80 level can mark a top, or $SPX might rise another few months. Certainly no tailwind Image
Consensus rises to 65 this week
Insiders last month sold the most stock since Nov 2015. That seems bad as $SPX fell hard the next 3 months. But insiders sold heavily in 2017 and $SPX rose every month except 1 that year Image
Sentiment: The drop in $NAAIM from 106 to 53 was extreme enough to push it below its 2 std dev Bollinger Band. In all instances except one, a higher weekly close in $SPX was ahead in the next few weeks (I think this idea is originally from @HumbleStudent ) Image
@HumbleStudent Sentiment: Market timers dropped equity exposure to 30%; Nasdaq exposure only 11%. “One of the most rapid retreats in more than 40 years"
marketwatch.com/story/this-1-b… Image
Sentiment: $SPX now lower. All gains given back
Likewise: all gains given back $spx
Market timers are now betting the market heads lower
marketwatch.com/story/why-sept… ImageImage
Equity ETF + MF outflow of $14.9b in the past week (Lipper). That’s big; here are outflows >$15b in the past 10 years Image
Third biggest outflow ever
$SPX - A higher weekly close from this post this week. The set up: a snap back after a shape fall in bullish sentiment
Sentiment: Not like the late-90’s
Since then, $SPX up +7%, $RUT up +12%
BAML: fund mgrs continue to rotate out of cash and bonds and into equities, but overall all 3 of these are neutral. Within equities, the US has been and remains overweight Image
BAML: two months ago, slightly overweight cash and bonds and underweight global equities.

BAML: 3 months ago, FMs were more than 1 std dev underweight. Since then, global equities up +8%, US equities up +14%
Swing at the fat pitch or go home
NAAIM: Active investors were mega leveraged long (107) at the end of Aug (chart below). $SPX fell 8% in next few wks. Today, back to leveraged long (103)
In between, NAAIM fell hard (with $SPX); in the next 5 wks, $SPX rallied 7%, hence the swift rise in NAAIM
Hulbert: after a 10% gain in one month, extreme bullishness has returned (top 99% since 2000). Don’t expect a runaway market to the upside
marketwatch.com/story/stock-ma… ImageImage
Sentiment: this is consistent with Hulbert and NAAIM. Scroill up
The much maligned AAII bull-bear spread above zero (+3) for the first time since mid-February. Since then, $SPX +18% Image
Consensus bulls rises to 68 this week, the highest since the week of Feb 17
Robert Shiller sees a stock market crash: 2017-20 ImageImageImageImage
A crash is a greater than 1 standard deviation event. Since 1980, that’s 1987, 2001-02, 2008-09 and 2020 Image
It did not runaway
Equity put/call doesnt get this low very often. If past is prologue, $SPX not likely to runaway and never look back $cpce Image
Sentiment: AAII bulls minus bears spikes up to +31. Chart below is the last 10 years >30 (1st instance in 6-mo). $SPX has gone up, down and sideways. Last time (Dec 2017) $SPX rose 8% in next month, then dropped 9% Image
AAII bulls 56%. Stats below for spread >55% since 1987. $SPX bias still higher; 6-mo later, all 12 instances higher by median 7.5%. From @NautilusCap Image
Standard comment on sentiment: bullish and bearish extremes are not the same
Recall >80% of stocks now above their 200-d. Combine that with the spike in positive retail sentiment. FinTwit says former is bullish but latter is bearish, which doesn’t work. But it’s what you should expect: when investors bullish, they buy everything and so breadth expands
Equity MF + ETF inflows of $24b this week. That’s very big
Big inflows have been more rare than a Yeti. The only week remotely similar in 2020 was June 8. Inflow of $20b. $SPX dropped 8% in 5 days. n=1.
“It doesn’t pay to immediately assume a bullish public will automatically be proved wrong. Not every rally is hated, not all upside progress happens in ironic repudiation of the consensus”
Article for the above quote:
Largest equity fund inflow in at least 20 years
Spike in insider selling. Not a big fan of this data as it could be attributed to the end of the blackout period. Prior spikes in the past year havent led to a fall in $SPX (1st two charts). Likewise, a massive spike in Feb 2017 led to more upside in $SPX (2nd two charts) ImageImageImageImage
In comparison, insider buys are usually a pretty good sign.
For the 1st time since January, fund managers are firmly bullish. Cash and US equities more than 1 std dev from the mean and global equities very close to being so.
Image
See prior chart on the energy sector. So hated, even the UK is more liked
$SPX annual gains are slim to none when sentiment at current levels. Like breadth, the best annual gains occur when sentiment is weak. These things go together
More confirmation of bullish sentiment, with NAAIM back at 106 this week. Stuff below from last time
Two weeks later, and $SPX is right where it was
Fear & Greed at 88. When over 80, $SPX is sometimes (not always) at/near a short term high; if $SPX continues higher, it usually (not always) gives those gains back. That’s how bullish sentiment works ImageImage
$CPCE back down to 37 today. See tweets below. 10-d and 21-d avgs are at Sept 1-2’s 20-year lows
Investor Intelligence Bulls - Bears Spread at +48% for a 2nd wk in a row. Peaked at +46% in late August and +41% in late Jan. Charts below show last 20 yrs. $SPX can drop or chop sideways for many months; if it just goes higher, those gains normally given back ImageImageImageImage
Active managers (NAAIM) leveraged long for the 3rd week in a row (103). The only other time NAAIM has been >100 three wks in a row was late August
Pfizer Slashed Its Covid-19 Vaccine Rollout Target After Facing Supply-Chain Obstacles - WSJ

If everything going to plan was part of your 2021 forecast, allow me to introduce you to Kahneman

$NAAIM (active managers) leveraged long w/ 4-wk MA at ATH. Mattered in August but not at all in 2013-14 or 2017 Image
Doesn’t feel like the late 1990s (at all) but this says otherwise. In any case, we know from that period that (a) this can go on for a long time before it ends and (b) gains are eventually given back ImageImageImageImage
Ignore this week’s $12b outflow from equity EFTs + MFs. Happens every December
Investor sentiment after a +14% gain in two months $spx
marketwatch.com/story/rarely-h… ImageImage
Most recent instance market timers very bullish was mid-Oct. $spx -7% in next 2 weeks. Post below. But everyone should know by now that excessive bullish isn’t the symmetrical opposite of excessive bearish
From 5 months ago. $SPY underperformed $VEU by 600bp since then. $EEM is now consensus overweight for 2021.
Fund managers’ EM allocation +1.9 standard deviations from the mean. ATH ImageImage
Active managers (NAAIM) at 113 (leveraged long) this week. That’s never happened before. Consistent with $CPCE, Citi's Panic/Euphoria and BofA’s Sell Side gauges. Scroll up on the non-symmetry of these measures
Here’s the BofA Sell Side update
Here’s the latest Citi Panic/Euphoria chart
Here’s NAAIM, referenced above. I mention it mostly because other measures concur. On it’s own, it has problems as documented before in this thread (short history, long lags, false signals) Image
Equity only put/call <0.4 on 7 days so far in 2021 (including Monday) and today’s sell off has undercut the $SPX close on all of them
Flows in and out of equity MF + ETFs has been oddly muted the past 5 weeks (from Lipper) Image
$CPCE goes boing to the highest level since Nov 2 (0.58)
Understanding insider transactions 1 of 3
Insider transactions 2 of 3
Insider transactions 3 of 3 Image
$11b equity MF + ETF outflow last week, which is notable next to the relative calm recently. Last outflow like this was the week before the US election
$CPCE 21-d avg = 0.4 today, a new 20+ yr low.

Also, new ATHs in $SPX $COMPQ $NDX $WLSH $RUA and $RUT
$CPCE under 0.4 today (lower panel). The last one started the late January drop. After prior instances, $SPX hasn’t been able to run higher and never look back Image
$26b equity MF + ETF inflow this past week. That’s unusually large. Last year, happened in June (big drop) and the week after the November election (sideways for a week, then higher) Image
The string of sub 0.4 $CPCE starting Feb 8 now entirely retraced like every prior time Image
$CPCE 0.35 today Image
More than $50b inflow to equity MF + ETFs over 3 wks. That’s big (Lipper) Image
Yesterday’s low $CPCE immediately rewarded with today’s -2.4% drop in $SPX. Thanks for the fish Image
Scroll up
$CPCE pops to 0.63 today, the highest since Oct 30
A 4 month high in $CPCE, combined with the turn of the month, giving a nice fillip to $SPX today
Over the past two weeks, $SPX has dropped 4%. On one measure at least, don’t be surprised if more volatility is ahead.

One-month $CPCE (red line) is now the lowest in 20 years. The only comparable period is the late-90s (chart from Tom McClellan) Image
Those red arrows in the prior chart show other times during 1998-2000 when one-month $CPCE was as low as today. The chart below blows up 1998-2001. This period was marked by more gains in $SPX but also a high frequency of 5-10% swings. It wasn’t glide higher Image
Getting back to the original chart, the bigger drops in $SPX (more than 10%; blue arrows) came only after one-month $CPCE had been rising (blue lines), not when it was sitting at a relative low Image
So, Friday’s jump in one day $CPCE relieved short term complacency. The watch out now is whether it heralds a transition to more protection (higher one-month $CPCE) that *could* preceed a more meaningful top
The usual caveat about market action not being the product of single variables applies
The “sell side indicator” never made any sense. It said participants were bearish when Greenspan uttered “irrational exuberance”, bullish at the end of tech crash and more panicked in 2013 than anytime during the GFC Image
Active investor equity allocation (NAAIM) has fallen from 110% to 65% since the $SPX peak 3 weeks ago.
$SPX dropped -4% since the most recent two sub-0.4 $CPCE readings Image
The 5% drop in $SPX is consistent with the prior pattern in CPCE. One-month has risen from 0.4 to 0.45. A continued rise sets up this bigger pattern. Scroll up
NAAIM fell from 110 four weeks ago to 49 this week, pushing it below its lower Bollinger. Higher high for $SPX odds on. Notes on chart. h/t @HumbleStudent Image
Another $14.8b this week brings the last 5 wk equity MF + ETF inflow total to over $65b (Lipper)
Why bullish sentiment is harder to read and use than bearish sentiment:
This chart is making the rounds again. Since 2013 (arrow) it has been used to show that the bull market is over because investors have too much money in equities. $SPX up +140% since then. Image
Prior chart: a post from 4 years ago on why this measure is not valuable. $SPX up +80% since then
$18.3b is the 2nd biggest weekly equity MF + ETF inflow this yr. Scroll up for more (Lipper) Image
The biggest weekly inflow came the week of Feb 8 and $SPX is now unchanged from that date.

It takes bulls to make a bull market but too many bulls and the cops show up and send everyone home
Remember the very low $CPCE on Monday? Pepperidge Farms remembers Image
$CPCE 39 Monday and $SPX now -1.3% lower. Today's pop to 57 is a level that has seen $SPX pop the 3 other times it’s happened this year Image
Scroll up to March 1 for a longer term view of CPCE using a 1-mo MA. This is a thread for a reason
$SPX popped +2% from yesterday’s open
3 weeks later and $SPX at a new ATH. This has been a good tell
Daily sentiment on $SPX over 90. Prior instances the last 3 years ImageImage
NAAIM back to 90, which is smack dab in the middle of the last 20-wk range

I think this is the only reliable set up using NAAIM data:
Consensus bulls at 75%, a level not reached since early 2018. Doesn’t get much higher

From 2004-2012, either extended chop (boxes) or a notable top (circles) followed (1st chart)

Since then, more likely to rise further and then give those gains back (arrows; 2nd chart) ImageImage
The slow rise in 10-d avg $CPCE off a 20+ year low isn’t the positive signal it’s being betrayed as being. See next tweet Image
$CPCE popped to 0.52 today, highest in a month. Last 1 yr, when $CPCE crossed above 0.5, $SPX closed higher by avg 1.9% w/in 5 days in 17 of 19 instances (89%). R/R >2:1 pos
$SPX +1.1% on Day 1
$SPX up +1.9% on Day 5
NAAIM over 100 (leveraged long; bottom panel). $SPX can run higher (blue lines) or chop/drop (red lines) over the next few weeks. In all but 2, any further gains given back (arrows) Image
$CPCE is rising (10-d avg shown below). It doesn’t mean what you might think it means Image
$NDX daily sentiment reaches the March 4, 2021 low. Here’s last 3 yrs Image
$CPCE pops to highest since Feb 26. A bounce is high odds. Not necessaily the low Image
Two days later, $SPX +2.8%
The Fear & Greed Index hasn’t fallen below 20 (fear) since the March 2020 low. That’s an unusually long time. No year in the past 10+ has avoided at least one ‘fear’ episode, even mega bullish years like 2013 and 2017 ImageImageImageImage
$SPX (upper panel) when Fear & Greed falls below 20 (lower panel) Image
$CPCE drops below 40 (to 37) for the 1st time since April 5. Scroll up for charts
This chart has been making the rounds. MS’s market timing indicator as high as 2000, 2008 and 2018 (bad!) and also 1990, 91 and 92 (not bad!). Overall, looks like a small sample/coin toss $spx Image
Since then, $NDX +6.5%
$CPCE at 35, lowest since Feb 24 and Jan 13
Fund managers are 61% overweight global equities, which is +1.3 std dev above the mean. Bond allocations are at a 3-yr low (-1.4 std dev below mean). This hasn’t been when equities have outperformed a 60-30-10 portfolio for long. From BAML ImageImage
$CPCE has printed sub-40 three times in the past 11 days. $SPX was lower the next day each time and today it's about 1% below the level of even the first one. Follow what works
All gains and more given back a month later and now even more than two months later $SPX just 0.8% higher
Wild guess: equity inflows will not be anywhere as strong in the 2nd half
$CPCE popped to 59 today. That’s usually been good for at least a one day boiunce in the past year Image
$SPX now nearly +1%
Investors Intelligence bull/bear ratio reached 4.0x this week for the first time since Oct 2017-Jan 2018 (shaded area). $SPX ran up +12% during that period then gave it all back and was net flat a year later Image
Fear & Greed 23 today, the lowest since the pandemic bottom in March 2020 (it dropped to 25 the day before the Nov election). Below 20 is odds on
$CPCE Friday pops to 69, the highest since the election. In the past +1 yr, this has been a multi-day bottom for $SPX Image
Fear & Greed below 20 (16) today, just like every prior year
A week later and it drops to 3.18x. $SPX fell just 2.8% (closing basis) and is already back within 1% of ATH
Most of the time when bullish sentiment drops as much as it did this week, $SPX has bottomed, unless there is a 100-yr pandemic. From @McClellanOsc Image
$8.8b MF + ETF equity outflow in the past week, the 2nd largest of 2021 after the $11b outflow at the end of Jan after a -4% drop in $SPX (Lipper)
$SPX +16% since then
Update
In the event, $SPX +0.9% and $NDX +1% this week
$CPCE 0.39 today. Add that to the channel top Image
Even the pessimists turned bullish today. Tweets below: same person, exactly a month apart, during which $SPX rose 3% and made a quadrillion new ATHs ImageImage
Mom and Pop sentiment (AAII 4-wk avg) at the most bearish since Oct last year. Not yet extreme but more times than not, this isn’t the time to be a pessimist $spx Image
Prior tweet: adding data back to 1990 Image
$9.3b MF + ETF equity outflow in the past week, the 2nd largest of 2021 after the $11b outflow at the end of Jan after a -4% drop in $SPX

Last two weeks: $16b outflow (Lipper)

Dropped to -13 this week, which is below the green line. See comment below
Chart for prior tweet Image
A wide spread exists between good and bad market timers (LHS). $SPY during similar times (RHS). Read the source footnote ImageImage
Since then, $SPX fell less than 1% and is now 5% higher
AAII bull-bear spread went from -13 to +19 in the past 3 wks. The 4-wk avg is back to zero (neutral)
NAAIM went from 55 to 98 over those same 3 wks
2 weeks apart
ht @hmeisler ImageImage
Today I received a DMCA takedown notice for reposting a Citibank Panic/Euphoria chart 7 months ago. I see this chart being reposted everyday so not exactly a secret Image
Here it is if you want to see a recent update
Active investors (NAAIM) back to leveraged long (103%) for the first time in 6 months. More often than not leads to something (red lines) but often enough it doesn’t making it hard to use on it’s own (green lines) Image
Likewise, +$15b inflow into equity MF + ETFs this past wk is the largest in 7 mo and the 4th largest of 2021. Past 2 wks +$26b inflow (from Lipper)
And likewise, $CPCE drops to 0.36, the lowest since mid June and one of the lowest in 20 years. Here’s all instances since 2004. Spot the pattern ImageImageImage
Fear & Greed at 78, the highest since late Nov + Dec last year. See comments and charts below
Active managers (NAAIM) now 108% leveraged long. n=4.

Happened in Jan and Feb this year and $SPX down 3% soon after.

Two other times in 2017: tax cut fever in Oct (SPX ripped higher) and Dec (ripped higher then gave it all and more back and was unchanged 5 months later) Image
Fund managers the most overweight US equities in 8 yrs (Aug 2013). Small sample but tendency to underperform when the consensus is this lopsided. From BAML Image
Took a month but $SPX closed lower today (all gains given back)
Fear & Greed back down to 22. We’ve been down here 3 other times this year (vertical lines and blue text). F&G was 86 the day small caps peaked 3 weeks ago ImageImage
$SPX is down 4% from its ATH; the very broad Russell 3K is down 5%. Fin Twit feels like the deathly hallows. Low volatility years like these make everyone super sensitive to every little nudge
Spend 2 seconds on Fin Twit and you’ll see why equities fell 5% in Sept, rose 10% in Oct and then fell 4% again. Overreacting in both directions is what equities do. Set your sails on things like macro but trim based on psychology because that’s what drives ‘short term’ action
Since 1980, $SPX has fallen an avg of 14% intra-year. Take out the worst 8 yrs - where $SPX fell 20-50% - and the avg is still a fall of 10%. This year’s max is just 5%. You’ll likely see mean reversion in the next 12 mo. Get yourself mentally prepared
$CPCE >60 for the first time since Aug. All instances since the election shown below Image
Things got pretty extreme on Friday. $CPCE at the highest since the 8% DD before the election (LHS). $VIX at one of the highest levels in 10 yrs (RHS). Unless we’re repeating the pandemic crush, this looks like capitulation ImageImage
Nothing works perfectly all the time but here’s another tailwind. Give yourself an early holiday gift and head on over to @sentimentrader. Image
4-wk AAII bull-bear spread (-10) at lowest since wk of Oct 4. Usually a tailwind for $SPX Image
NAAIM (active managers) drops to 52, the lowest since the wk of May 17. They were leveraged long (>100) at the end of Oct/beginning of Nov when small caps hit ATH. That’s how this works
End of year fund flows get super funky so take whatever is printed with a pound of salt
That’s a 2 standard deviation move in NAAIM. See note on chart Image
There was a major regime change after the pandemic: in the past 18 mo, this has been where investors seeking protection has peaked (and an $SPX low has formed), but before Covid it was more likely to mark a peak in risk-seeking $cpce Image
$SPX +3% two weeks later. Fin Twit bearish right before X-mas. Naughty naughty
II bull/bear ratio neutral. $SPX hasn’t taken a big tumble without this ratio > 3 in more than 20 years (circles). Note, it can stay on the boil for quite some time Image
Those circles are drops of >10% on a closing basis btw
5-d $cpce back at the red line today. Same comments apply
Retail sentiment (i.e., FinTwit) most bearish since July 2020. Unless it's the GFC, this is near where the lows in $SPX have formed. Image
(This week was -26 but I posted the chart before stockcharts had updated their data)
“Minus 67.2%, which means that the average Nasdaq-focused stock market timer is recommending that clients allocate two-thirds of their equity trading portfolios to going short. That’s an extremely aggressive bearish posture"
Lowest AAII bull-bear spread since July 2010 (April 2013 was a bad print). 4-wk avg lowest since Sept 2020 ImageImage
For completeness, here’s Investor Intelligence bull/bear ratio, which dropped to 1.3x this week (LHS). Post-GFC, sometimes it stops here, sometimes in falls <1x; regardless, this is the low end of the range where $SPX has been near a bottom (RHS). Consistent with other data ImageImage
In the past 35 yrs, the only times AAII (retail) sentiment got more bearish and $SPX failed to rally was during the 1990 and 2008 recessions Image
Current sentiment Image
II bulls-bears chart from Tom McClellan (annotations mine). Near a low in $SPX unless its a GFC Image
Fear & Greed dropped under 20 today (18) for the first time this year. Tweet below from the start of the December rally, fwiw
Current sentiment: there’s a 10% chance of civilian-ending global nuclear war
Per BAML, fund mgr cash basically at a 20-yr high and macro optimism at nearly a 30-yr low ImageImage
AAII, II, BAML, F&G all very consistent
The 2-12 month forward win rate and returns are way above ‘anytime’
Current sentiment: prepare for a recession and bear market Image
$SPX +8% since II bulls-bears turned negative in late Feb. That’s how this works
Image
The other 3 coincided with recessions
TLDR: smart money has gotten very bullish at $SPX lows
Current sentiment: recession is coming Image
Retail investors
By 2008, UE, YC, LEI and home sales had all long since rolled over, so a repeat of that exception now is very unlikely. Image
BAML fund mangers:
1. Commodity overweight most ever
2. Cash overweight 2 std dev > mean
3. Equity underweight 1 std dev < mean
4. Bond underweight 1 std dev < mean

Is it surprising they are hiding out in healthcare, utilities and staples? Image
FinTwit I mean AAII sentiment still in the drink, like BAML and Investors Intelligence
$9.6b MF + ETF equity outflow in the past week. Big, but not ginormous. Surprisingly, this is the 2nd largest outflow since Jan 2021. They’re voting with their feet
No FinTwitter should be surprised by the continued bearishness of AAII (retail). Consistent with II (charts below), BAML and fund flows (scroll up). All the bloggers on StockCharts are bears and recession chatter is non-stop despite the contrary evidence. All very consistent ImageImage
Prior charts from Ed Yardeni.
yardeni.com/pub/peacockbul…
Last 35 yrs of AAII 4-wk spread vs $SPX Image
$14.7b MF + ETF equity outflow in the past week, the largest since late Sep 2020. Not a random date; check the chart

Last two weeks: $24b outflow (Lipper)

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More from @ukarlewitz

Urban Carmel Profile picture
Jun 15, 2024
Since its October low, $SPY has had one drawdown greater than 3% (in April). That's unusual. Even 2013 - a banner year with volatility - experienced multiple 3-5% drawdown every other month or so
2013, 2017, 2019 and 2021 were all banner years - YE gains ~20% or more with max drawdown of around 5-6%. All except 2017 (Trump tax cut) had multiple +3% drawdowns throughout the year (lower panel) Image
Similarly, 1985, 1989, 1991 and 1995 were banner years and all with the exception of 1995 had multiple +3% drawdowns throughout the year Image
Read 5 tweets
Urban Carmel Profile picture
Mar 3, 2024
What current trend and momentum have historically implied for the year ahead. A short thread

Up 4 months in a row from November-February: 100% higher at YE by median 13%. Risk/reward 10:1 positive next 12-mo
Up January and February: higher by 20% for the full-year, implying ~12% upside from here
Up 20% the past 4 months: 100% higher at YE by median 15%.
Read 13 tweets
Urban Carmel Profile picture
Feb 7, 2024
FinTwit is losing its mind over the breadth divergence. A thread
$SPX is up 6% since the current divergence started two months ago. That's not unusual at all
Read 9 tweets
Urban Carmel Profile picture
Jan 4, 2024
Unemployment claims (4-wk avg) dropped to 208k, one of the lowest levels in 50 yrs
Today’s NFP was +216k. December 2020 is still the one and only time it was under 100k since the start of the pandemic
All the jobs lost during the pandemic were recovered (and more) in 2022, yet more jobs were added in 2023 than any year since 1984 Image
Read 4 tweets
Urban Carmel Profile picture
Jan 3, 2024
What to expect in an election year? Based on the averages:
1. Chop/flat through April
2. May swoon
3. June-August summer ramp
4. Flat Sept-Oct
5. Post election ramp into year-end
But, if there's an incumbent:
1. Jan-Feb ramp
2. Chop/flat March-June
3. July-September ramp
4. Flat Oct
5. Post election ramp into year-end
But, if $SPX was up 10% the year before:
1. Jan ramp
2. Feb-March swoon
3. April-Aug ramp
4. Flat Sept-Oct
5. Post election ramp into year-end Image
Read 7 tweets
Urban Carmel Profile picture
Feb 20, 2023
This sounds bad until you realize that the change in "global M2 liquidity" doesn't correlate with the performance of $SPX (1/2)
Green circles: "global M2 liquidity" falls and $SPX rises anyway (2/2) Image
$SPX fell 20% while the "BOJ balance sheet" expanded, and then when the balance sheet started to contract, $SPX rallied 16% (arrows). News you can use Image
Read 5 tweets

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