This past week gave us the most bearish reading that we have seen since last October. We dropped from a reading of 36.11% all the way down to 11.11%. Remember that higher readings point to a better outlook for equities.
Right now the only thing that is saying buy equities is that we are very oversold and are likely due for a bounce. Valuations are starting to tick up a bit as SP500 earnings have been dismal at best making the markets P/E ratio to climb a bit. Market internals are in horrible shape with the NYSE and NASDAQ A/D lines going off a cliff the past few weeks. Finally world leaders are simply not leading. In the US Obama, Geithner, and congress have up to now dropped the ball in a big way and have only inspired more selling instead of any confidence at all that they have a clue as to what they are doing. Abroad we have awesome policy makers like Jean Claude “Van Damme” Trichet who is only now coming around to the fact that financial conditions in Europe are horrible. In fact as readers of our weekly letter know we are very bearish on the entire EU as we think there is a good chance that the Euro doesn’t even exist in a few years. If you think that the banking system in the US is on the ledge then take a look at countries like Austria where they are heavily exposed to Eastern Europe.
We are not doom and gloomers but until our supposed leaders start leading we think that the market will have a hard time having a sustained move up. That being said if market internals can consistently improve and we find some leading groups in the market we could have a sustained rally. But for now we are trading small and are really just sitting on a few positions and a large pile of cash looking for rewards that justify the risks.
The Macro Trader
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