Sentimental Journey

Much is being made of this weeks AAII (American Association of Individual Investors) sentiment survey, which was extraordinarily bearish (the sentiment, that is). Only 19% of respondents expected the market to head higher over the next six months, the lowest reading since near the bottom of the bear market in 2009. This contrasts with various measures of professional sentiment, which are uniformly bullish.

What if individuals have finally wised up to the fact that they are being treated by Wall Street as the patsies in the game? Is that possible? Or do we need to see a capitulation which turns the individual sentiment bullish – and therefore retail “all in?” We’ll see.

In the meantime, we have a fairly typical day here. Economic indicators came in very poor – a 0.4% fall in retail sales and the largest drop in consumer sentiment ever recorded, from 78 to 72.3. Consumer sentiment, by the way, is usually right about the economy so one or the other of the retail sentiment measures seems likely to fail in its usual predictive role.

Stocks sold off on the economic reports, but the pumps were just turned on (shortly before noon) so they are probably returning to unchanged or higher (as usual). Of more interest are the falls in gold (GLD -3.6%, breaking support), commodities (GSG -1.5%, lowest since last July), and crude oil (USO -2.6%). And it is not the dollar, which is pretty much unchanged on the day. The most hated asset class is up strongly ($TYX -2.4%), all of which are consistent with the deflationary or at least disinflationary scenario preferred by this writer, and suggest that the pumpers may have trouble keeping stock prices up for much longer. Oh, and those bitcoins? Down to $61 this morning after a recent high of $266. Quite a ride.

Edit: Pumpers – the Wall Street cartel – did succeed in returning stocks to unchanged, although breadth was bad showing the manipulation failed to attract any real buying support. GLD got worse, closed down 4.7% on huge volume. $TYX fell even more, down 2.7%. Good day for the most hated asset class, bad day for inflationistas.

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