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Coolhand's Market Analysis

That's a Lot of Bull

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The good news is that had another positive close Friday. The bad news is that sentiment continues to be highly bullish. Typically, that's a warning for the stock market. We've been bulled up in numerous pockets for at least a week now, and next week looks to be shaping up the same way.

Last week our TSPTalk sentiment survey had 58% bulls to 28% bears

This coming week:
62% bulls to 28% bears

Then we have Investor's Intelligence showing over 48% bulls after last week's 50% bulls:

Tickersense was split about 37% bulls to 37% bears.

RealMoney looks like our survey with 61% bulls to 28% bears.

Trader's Talk is currently showing over 58% bulls to 29% bears for Monday's trading.

Overall, that's a lot of bull, so if we have a pre-Christmas sell-off we'll know why.

Many traders thought the sell-off would have come last week and that we'd rally next week, but that wasn't the case. However, as we get closer to the holidays volume will drop off and that bullish bias could push this market higher, assuming a sell-off doesn't happen. But the charts are still wound up tight in a very narrow range, so the odds still favor lower prices before we move higher. This coming week will probably tell the story. Here's Friday's charts:

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One sell and three buys, but not much movement here.

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One sell and two buys here, and again not much movement.

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Our Top 25% continue to hold steady and these charts show how they are positioned for Monday's trading.

So the Seven Sentinels remain on a buy with 5 of 7 buys signals. But as I've already mentioned, sentiment is not giving us a good set-up for a rally. I'm hoping market volume begins to dry up now so that the bullish bias can push prices higher, but I'm not counting on it until after this week's trading. If we see a sell-off, it'll probably come this week. I'm watching Trader's Talk carefully, their survey only has about half the normal votes, but they have till Monday's open to vote, so it can still change. But if it stays North of 50% bulls, I'm looking for some selling to begin the week.

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Updated 12-12-2009 at 09:32 AM by coolhand

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Comments

  1. Birchtree's Avatar
    We need bulls to stampede the market higher and now we have plenty - yes the 10% head banger is out there somewhere but not yet. It will arrive as a blind side - they always do. I'm still taking my clues from the VIX and I'll be getting nervous when it drops below the 20 level. Until then I'm good to ride.
  2. tsptalk's Avatar
    Thanks CH. Great info!

    The AAII Survey is 43% bulls, 35% bears for a 1.23 bulls to bears ratio, which is not bad at all. If anything, it is actually bullish for stocks.

    This survey has hit 2 to 1, 4 to 1, and even 8 to 1 bulls to bears ratios in this decade, so 1.23 after a 60% rally is not bad.

    Why other sites, including TSP Talk, are so much more bullish is a good question. I would like to think that perhaps the TSP Talk survey is slowly turning into a smart money indicator, but that may be too much to ask.
  3. coolhand's Avatar
    Quote Originally Posted by tsptalk
    Why other sites, including TSP Talk, are so much more bullish is a good question. I would like to think that perhaps the TSP Talk survey is slowly turning into a smart money indicator, but that may be too much to ask.
    TSPTalk has come a long way Tom. TSPers who follow this MB have learned quite a bit about how markets trade. There are quite a few very good traders in our ranks now and quite honestly, I think we can match any other MB in terms of knowledge and savvy.

    And it's only going to get better.

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