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Coolhand's Market Analysis

Heading for the Sidelines

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Both the Top 50 and the herd (Total Tracker) are under a 50% stock allocation for the coming week. Here's this week's charts.

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The Top 50 has an overall 11.64% stock allocation going into the new week. That's the lowest stock allocation for this group in more than 18 months. Their bond allocation is just shy of 30%.

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The herd had been making incremental moves in their stock allocation of no more than 2.26% for the past three weeks, but that changed for the new week as they've lowered their stock allocation by 10.24% to 46.34% overall. Their bond allocation is only about half that for the Top 50.

Overall, we're getting more bearish, which could limit the downside action if we're any kind of barometer of the overall market sentiment.

Here's a snapshot of how well the herd has performed when their stock allocation changes by more than 10% for any given week. This chart is for calendar year 2011.

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We can see that they haven't done all that well of late and have been wrong six of the last seven times when using the S fund as the fund of choice. The change in allocation for a given week is shown in the column labeled "% Bullish Shift", while the column labeled "% Bullish Shift for S" shows how that fund performed for that given week. Red means they were wrong, while green indicates they were correct.

Our sentiment survey is on a hold for this coming week, which keeps the system in the C fund for now. And with the survey showing 50% bears in what arguably appears to be a bear market, I can't help but think we're heading higher soon. That was my call late last week based on TRIN and TRINQ showing oversold conditions. But I'm suspicious of September and what it may bring later in the month as I'm anticipating that this market will eventually test the previous lows.

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Updated 09-05-2011 at 08:27 PM by coolhand

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  1. coolhand's Avatar
    I had thought we'd see some strength to begin the week. Perhaps what happened in the overseas market today is a glimpse into what we can expect for own market on Tuesday.

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