Global markets continue to decline after the Fed and the world's central bankers "...front-loaded a tremendous market rally, starting in 2009" according to former Dallas Fed President Richard Fischer. The SPDR S&P 500 ETF Trust (NYSE: SPY) has pushed below September 29 low point of $186.93. That correction began when short interest on SPY peaked at 60 percent, according to JPMorgan's Nikolaos Panigirtzoglou, and lasted eight days.
Twelve days into this recent pullback from $207 to $187 and investors are becoming unhinged as their sentiment swings from optimism to pessimism resulting in equity fund buying, then selling, generating a similar swing seen in 2011-2012, said Panigirtzoglou. He noted that period for an additional reason, which is to recognize 2011-2012 sentiment swings created the environment which "proved fruitful for mean reverting trading strategies". Given the recent strong pessimism, Panigirtzoglou is positive on the equity market for the near term.
Focusing on sentiment solely for signals in environments like this is dangerous. Adding to the growing disconnect in prices and investor optimism has been a growing crowd of pundits proclaiming the recent correction is not like 2008.
The Wall Street Journal ran a piece from Justin Lahart claiming:
"But there are crucial differences between now and those dark days, at least for the U.S. ...
/www.benzinga.com/analyst-ratings/analyst-color/16/01/6148495/as-global-unwind-deepens-retail-investors-have-been-heav alt=As Global Unwind Deepens, Retail Investors Have Been 'Heavy Sellers Of Equity Funds' With More Than $25 Billion In Two Weeks>Full story available on Benzinga.com
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