Coolhand's Market Analysis

In spite of our sentiment survey remaining on a buy signal for the past six weeks, losses continue to mount for the bulls. In that time, the S fund has dropped -8.47%, including -3.96% just last week.




You might remember that going into the previous week, the Top 50 had increased their collective stock exposure by 20%, although total stock allocations remained conservative at just 29%. And on Tuesday (post holiday), those dip buyers were seeing some great upside action as the S fund tacked on 1.34%. Unfortunately, the rest of the week saw some serious selling pressure, which led to the major averages hitting multi-month lows.

Going into into the new week, the Top 50 dropped their collective stock exposure from 29% to just 16%.




On the other hand, stock allocation across the Total Tracker remained relatively unchanged with a total allocation of 47.46%; down just 0.53% from the previous week.

So our sentiment survey has given back much of its gains from the previous months as has the Seven Sentinels, which still remain in a buy condition, although it did flash an unconfirmed sell signal after Friday's action. But this market continues to be prone to whipsaw action, which makes cash or bonds (G or F fund) look very attractive. At some point, we're going to want to be a buyer in this market, but picking a bottom can be quite tricky. We're due for a bounce, but I'm not so sure it would be anything more than a selling opportunity. Sentiment is not overly bearish across the various surveys, so caution is still warranted.