Bloomberg is out with a piece detailing the analysis of UBS in regards to sentiment and the recent rally over the past few days.
From Bloomberg:
While the proportion of newsletter writers who said they are bearish on equities rose to a two-month high of 26.6 percent last week, it’s still below the peak of 46.3 percent reached in October, when the S&P 500 hit its 2011 low, according to data from Investors Intelligence compiled by Bloomberg. The New York Stock Exchange Short-Term Trading Index, a volume-based market breadth indicator, reached a 2012 peak of 2.52 last month, failing to break 3.0, a level that Michael Riesner and Marc Mueller of UBS consider a sign of capitulation.
“The missing panic sell-off and the low levels of bearishness are suggesting that we still have a high level of complacency in the market,” the Zurich-based analysts wrote in a note today. “With the current sentiment mix we can clearly say that the U.S. market is still far away from a contrarian bull call, which is one reason why it is likely to see more near term pain into June/July.”
I looked at the extreme pessimism in the AAII survey on May 21, which turned out to be a short-term bottom in the major indices. However, UBS apparently doesn’t see it that way. On the intermediate-term, I think I agree with the UBS analyst. I think we could see further weakness once the market is able to suck in some more buyers. We didn’t see enough pain when we broke 1300 on the S&P, and so a new low could still be experienced…time will tell.
Source: Sentiment Signals S&P 500 Retreat May Not Be Over (Bloomberg)
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