The Good News? Investor Sentiment Still Stinks!

The bears are awake again.

In time, I am afraid we are going to find that we were all over-looking the enemy sitting right in front of us: The media process we are all consuming today is driving the crowd nuts, causing bad moves, heightened tension, incredible fear, and then vast errors in judgment.

Hey, we all do it so don't feel bad. And he who does it wins less in the end, despite how it might look in the short-term.

All of the chatter of "Hey this is great, upside breakouts are coming in everywhere..." from recent days has turned into, "Stocks are tanking....the reckoning has come, virus breakouts in cities are overwhelming the system, how far does this sell-off go, the tide has turned, where can investors hide...and do we really need a vaccine before the market really can stabilize???"

For long-term investors that means we have to reset the broken record that tells us we must find a way to mentally and emotionally ignore this. 

The vicious and immediate shift from one extreme of the emotional scale to the other is a) not healthy (bad), b) not effective (bad), and c) terribly detrimental to your long-term results as an investor.

And if you’re a trader? Sorry, I can't offer you anything here. I’ve never been smart enough to be a trader - and don't know anyone who is - for the long haul.

How Do We Remain Confident?

Stay focused on the larger events. 

In all areas of the markets, sadly, dividend stocks are getting shellacked and still feeling the pain of "everyone will cut." They all won't, but until that cloud clears pressure is expected. They are (over the longer-term focus) making a solid effort to stabilize. 

Let's Review Some Pictures

I have shown charts of the major indices below - all with the trade ranges highlighted.

We had previously covered this - and then noted how quickly the breakouts occurred. And I had noted then that I had made a big error in assuming the trade ranges would last longer than they did.

Well, it sure looks to me like testing is now underway. And that is a positive my friends so let's stay focused and patient.  

Cash levels will be very valuable as we shake out weak hands after this run, and chop is your friend over the long run.

Here are the Dow Jones, NASDAQ, S&P 500, and NYSE Composite (below). And please note that as much as the high-flyers get all the attention, a vast majority of investors are seeing results driven by the NYSE -- unless Tech is being added as a balanced focus:

And Sentiment? 

Well, the good news is that it still stinks, and we can be confident that if we get a week of ugly red ink the next reading in AAII will have a very good number for us.

There are still more bears than bulls in the latest: 

Sentiment coupled with demand for cash at all-time highs means you have a very nervous market.  

And very nervous markets see exaggerated selling.

Stay Focused on The Horizon

The summer haze is known for moving a few steps up and then a few steps back.  

That is nothing new.  

The news headlines tend to drive more short-term trading while volume falls as summer wears on. 

I suspect with more people at home taking in all the terrible news around the clock - it only exacerbates the issue at hand.  

Patient investors will use these windows to build for the long haul. 

Mike Williams, TruVestments